South Korean brokerage firms were engaged in litigation that cost over $2.6 billion last year, surging 44 percent against a year ago, partly due to China Energy Reserve & Chemicals Co. (CERCG)’s defaults on its bond payment.
According to the Financial Supervisory Service on Thursday, 33 out of 56 Korean securities firms faced total 334 lawsuits worth 3.04 trillion won ($2.6 billion) last year, up five in number and 43.7 percent in value from the previous year.
A brokerage faced 10 lawsuits worth 92.1 billion won on average last year, data showed.
Korea Investment & Securities was hit with the largest number of lawsuits (39 cases), followed by Yuanta Securities Korea (33 cases), Mirae Asset Daewoo (32 cases), Meritz Securities (28 cases), and NH Investment & Securities (27 cases).
By cost, Yuanta Securities Korea was embroiled in 1.73 trillion won lawsuits, the biggest among the brokerages, NH Investment & Securities 207.7 billion won, Mirae Asset Daewoo 195.2 billion won, Hanwha Investment & Securities 134.0 billion won, Korea Investment & Securities 125.1 billion won, eBest Investment & Securities 112.5 billion won, and Hyundai Motor Securities 103.8 billion won.
Hanwha Investment & Securities, eBest Investment & Securities and Hyundai Motor Securities saw a surge in litigation expenses of about 100 billion won in a year. They were among the underwriters and secondary buyers of asset-backed commercial papers (ABCP) whose underlying assets were dollar-denominated bonds issued by a subsidiary of China Energy Reserve & Chemicals Group (CERCG), the Chinese energy company that failed to repay the $350 million bond that matured in May last year. The total amount of the defaulted ABCP issued in Korea last year was 165 billion won.
By Jin Young-tae and Lee Ha-yeon
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