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Photo = Fair Trade Commission |
[Alpha Biz= Paul Lee] The Fair Trade Commission (FTC) has initiated a reinvestigation into the alleged collusion involving the Loan-to-Value (LTV) ratios of Korea's four major banks, starting with Shinhan and Woori banks.
According to FTC and financial industry sources on Thursday, the commission sent investigators to Shinhan Bank's headquarters on Wednesday to conduct an on-site investigation. Earlier, on the 10th, the FTC had sent investigators to Woori Bank’s headquarters.
This on-site investigation is seen as the starting point for a reinvestigation into alleged unfair joint actions by the four major banks.
KB Kookmin, Shinhan, Hana, and Woori banks are accused of exchanging information on LTV data, involving up to 7,500 cases, and aligning their LTV ratios at similar levels, a practice that could be deemed as collusion.
Typically, LTV ratios affect loan sizes and interest rates. Consumers generally prefer higher LTV ratios because they can borrow more money. In contrast, banks prefer lower LTVs to reduce the risk of loss in case of falling housing prices and mitigate the risk of loan defaults.
From a consumer's perspective, the bank offering a higher LTV on the same collateral would usually be the preferred choice. The FTC believes the banks lowered or maintained similar LTV ratios to avoid competition, thereby gaining unfair profits at the expense of consumers.
In February 2023, the FTC conducted on-site investigations into six banks, including KB Kookmin, Woori, Shinhan, Hana, NH Nonghyup, and IBK Industrial Bank, over collusion in loan interest rates and fees. However, they did not find sufficient evidence of collusion in interest rates or fees. The investigation scope was later narrowed to focus on “information exchange collusion” and included only the four major banks after June 2023.
The FTC's application of the term "information exchange collusion" refers to practices where competitors exchange sensitive information such as price hikes and costs, which can limit competition. If a competitor does not clearly reject or object to the exchange of such sensitive information, it is considered a form of collusion. Since the banks did not object to the exchange of LTV data, the FTC determined that they had implicitly agreed to engage in information exchange collusion.
After a year-long investigation, the FTC sent a report to the four banks in January of the previous year. This case is significant as it is the first to apply the newly introduced “information exchange collusion” clause under the amended Fair Trade Act of 2020. If the allegations are proven, the penalties could amount to billions of won in fines.
In the meantime, the banks have argued that they only exchanged information, not colluded, and that there were no unfair profits. They further claimed that there was no competitive restriction since there were some differences in the LTVs offered by each bank.
The investigation was originally expected to conclude by the end of last year. In November, the FTC referred the case to the full commission, the court equivalent, for a ruling on the information exchange collusion. The committee decided that additional fact-checking on the claims of both the investigators and the accused banks was necessary, which led to further investigation.
Following Woori and Shinhan banks, the FTC is expected to conduct on-site investigations at KB Kookmin and Hana banks soon. After gathering materials from the investigations, the FTC will conduct interviews with relevant parties and draft a new report for distribution.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
