The Fair Trade Commission has officially launched a reinvestigation into the allegations of collusion regarding the loan-to-value (LTV) ratios by the four major domestic banks, starting with Shinhan and Woori Banks.
According to industry sources, the commission began a field investigation today (12th) at Shinhan Bank’s headquarters, suspecting violations of the Fair Trade Act. A similar investigation is being conducted at Woori Bank’s headquarters. The field investigation for both banks is scheduled to last from the 10th to the 13th.
This field investigation marks the start of a reinvestigation into the “case of unfair joint actions by the four major commercial banks,” which the Fair Trade Commission has ordered to be reexamined.
Shinhan and Woori Banks, along with KB Kookmin Bank and Hana Bank, are accused of sharing about 7,500 LTV data points and aligning to similar levels to restrict market competition, thereby gaining unfair profits and harming financial consumers’ interests.
The LTV ratio indicates the loan limit available when a bank lends money using real estate as collateral. Sharing this information is alleged to have led to a restriction of competitive trading terms for secured loans.
The Fair Trade Commission began investigating the banks’ collusion allegations in February 2023, identifying collusion suspicions by the four banks and sending a review report (equivalent to an indictment) to each bank last January.
This case is the first to apply the “information exchange collusion” clause, newly established with the 2020 amendment to the Fair Trade Act. If these charges are substantiated, the banks could face fines in the billions, drawing significant attention.
The banks claimed that the exchange of information did not constitute collusion, nor did it result in unfair profits. They argued that there was no restriction on competition since the LTV ratios varied to some extent across the banks.
The initial disciplinary results were expected late last year, but the Fair Trade Commission members, acting as judges, opted for a reinvestigation instead of imposing sanctions. They determined that further verification of facts related to the arguments from the examiners and the parties involved was necessary.
Being the first case of information exchange collusion, it suggests a cautious approach in reaching a decision. It is also noted that the commission plans to conduct field investigations at KB Kookmin Bank and Hana Bank soon.
The Fair Trade Commission’s examiners plan to gather evidence through onsite investigations, conduct interviews with relevant parties, and then draft and send a new review report.
(Photo provided by Yonhap News TV, Yonhap News)