Authorities conducted a raid on HanKuk Rating & Data Service, South Korea’s largest corporate credit rating agency, on March 26 amid allegations of manipulating company credit scores for bribes.
Secret Codes Exposed in Internal Communications
Investigators uncovered evidence that executives used covert phrases like ‘1st grade at 1 o’clock’ and ‘2nd grade at 2 o’clock’ to signal the delivery of inflated ratings at specific times. These codes appeared in messages coordinating with client firms seeking favorable assessments.
The probe targeted 35 executives, focusing on operations from September 2021 to May 2023. Documents seized revealed how major companies bribed staff to secure higher grades, overriding standard evaluation criteria.
Impact of Manipulated Ratings on Funding
Credit ratings directly influence borrowing costs. Top grades like AAA enable firms to access loans at lower interest rates, often reflected in operations as a key metric alongside financials and governance.
HanKuk handles nationwide corporate evaluations, established in 2005. Despite past scrutiny, such as a 2012 subsidiary fine, industry experts note persistent pressures from sales targets.
Each rating assignment generates fees of 60 million to 100 million won for the agency, creating incentives for adjustments to meet client demands.
Agency Response and Broader Concerns
A credit industry official stated, “Accurately determining ratings is meaningless without operational reflection, yet many firms struggle due to sales pressures.”
HanKuk executives have shifted blame to major clients but confirmed ongoing enhancements to internal controls and messaging systems. Police suspect executives collected bribes via intermediaries before funneling gains to primary companies.
This scandal highlights vulnerabilities in Korea’s credit evaluation sector, where TCB-affiliated firms dominate assessments for banks and investors.
