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Photo = Fair Trade Commission |
[Alpha Biz= Paul Lee] The Korea Fair Trade Commission (KFTC) has recently intensified its scrutiny of the financial sector, launching regulatory proceedings in connection with two major collusion allegations involving the country’s leading banks. These include suspicions of collusion over the Loan-to-Value (LTV) ratios by the four major banks and collusion among banks and securities firms regarding government bond transactions.
According to financial industry sources on the 6th, the KFTC has completed its re-investigation of the LTV collusion allegations involving the four major banks and has adjusted the basis for imposing fines, with projections suggesting the penalties could exceed 1 trillion KRW. Previously, the fines had been expected to amount to several hundred billion KRW.
The KFTC has found that the four major banks—KB Kookmin, Woori, Shinhan, and Hana—shared information on approximately 7,500 cases related to LTV in advance, coordinating their loan limits. This practice is viewed as having restricted competition in the market by setting similar loan terms. LTV refers to the ratio used by banks to determine the loan amount they will extend when a property is used as collateral. For example, if a property worth 1 billion KRW has an LTV of 70%, the loan limit would be 700 million KRW.
The financial sector is strongly protesting, arguing that simply exchanging information does not constitute collusion. Banks contend that the information sharing was done from a risk management perspective and that no unfair profits were made. One banking source stated, “If LTV were lowered, the loan limits would decrease, reducing interest income, so banks had little incentive to collude,” and added that the data sharing was aimed at supplementing information needed for calculating LTV.
The Financial Services Commission (FSC) has expressed its discomfort with the situation, as LTV regulations are part of the government’s broader measures to manage household debt. The FSC believes that the information exchange between the banks was in cooperation with financial policies. If the KFTC treats this cooperation as collusion, it could create difficulties not just for the banks but for the FSC as well. An FSC official remarked, “From the banks’ perspective, they need to issue loans and make profits. It’s not typical for banks to collude to reduce profits.”
The KFTC sent a report on the alleged collusion to each of the involved banks on the 18th of last month, suggesting regulatory action. The commission plans to hold a plenary meeting after gathering the banks’ feedback to discuss whether to proceed with sanctions. Should the final conclusion be that collusion took place and substantial fines are imposed, the banks are preparing to jointly file an administrative lawsuit.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
