South Korea’s financial regulator has announced plans to investigate local banks that sold rate-linked products – those tracking German 10-year bond yield, UK and US dollar swap rates. The banks have come under fire for misselling the ‘high-risk’ products.

The Financial Supervisory Service (FSS) said Monday that it will conduct a probe into the sales as well as structuring of derivative-linked securities (DLS) which have the UK and US dollar swap rates or German 10-year bond yields as their underlying asset. There is KRW822.4 billion (US$678.6 million) notional outstanding on the financial products linked to the foreign rates in South Korea, of which 90% was invested by individual retail investors, according to the FSS. The largest distributor o