A probe by South Korea’s financial regulator into short selling which began last year has so far uncovered an alleged KRW211.2bn ($156m) worth of illegal trading activity by nine unnamed global investment banks, according to a report by Bloomberg.

The report cites a briefing by the country's Financial Supervisory Service (FSS), which claims that the banks violated mostly procedural rules while collectively shorting 164 stocks, while activity at an additional five banks remains under investigation.

According Hahm Yong-il, Senior Deputy Governor at the FSS, two of the nine banks are already facing penalties imposed by the financial authorities and have been referred to prosecutors for further investigation for allegedly violating the nation’s capital markets law. The watchdog plans to review penalties on the other seven banks.

Global banks and hedge funds have come under increased scrutiny in South Korea in recent months as part of a clampdown by authorities on naked short selling. Short selling is a contentious political issue in South Korea, where private retail investors often blame the practice for stock declines.