By Kim Jae-won
Korea's anti-trust agency is moving to accuse six local banks of colluding in setting certificate of deposit (CD) rates higher, charging more expensive interest to customers, officials and lenders said Thursday.
The Fair Trade Commission (FTC) said the agency sent its investigation report on CD rate collusion to Shinhan, Woori, KEB Hana, NH, Kookmin and Standard Chartered banks recently, giving them a chance to review the report and express their opinions on the issue.
A CD is a savings certificate entitling the bearer to receive interest. Its rate is a barometer for rates of loans and deposits in commercial banks.
"The final decision will come from our board members after they review the investigation report and the banks' explanations," said Kim Hyun-joo, a director at the FTC. "Nothing has been decided yet, including the date of the board meeting."
The banks denied the collusion allegation, saying they will express their opinions aggressively to the government.
"We have not colluded in setting CD rates. We will explain the issue actively to the FTC," said the Korea Federation of Banks in a statement.
Market watchers said that the FTC suspects that the lenders colluded in keeping CD rates at 3.54 to 3.55 percent for eight months from December 2011 to July 2012, though other interest rates had moved sharply during the same period. In fact, the yield of three-year sovereign bonds dropped to 3.29 percent in June 2012, from 3.48 percent in March 2012.
But, the banks said it was not because they colluded in setting a higher rate but because their issuance of CDs had declined at the time. They said the banks reduced the sale of CDs because the financial regulator stopped regarding CDs as deposits to follow international standards.
Lenders also argued that they have no rights in deciding the CD rate because it is calculated from data collected by the top 10 brokerage houses which trade CDs.
The FTC also accused the banks of conducting regular meetings of CD officials, suspecting they discussed ways to collude in setting the CD rate at the meetings. Banks admitted that they had such gatherings, but it was a meeting of low-profile officials who have no authority to decide the matter.
Lenders also argued that they have no reasons to raise the rate because it also applies to deposits, burdening them to pay more interest to customers.
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Jeong Jae-chan |
The Fair Trade Commission (FTC) said the agency sent its investigation report on CD rate collusion to Shinhan, Woori, KEB Hana, NH, Kookmin and Standard Chartered banks recently, giving them a chance to review the report and express their opinions on the issue.
A CD is a savings certificate entitling the bearer to receive interest. Its rate is a barometer for rates of loans and deposits in commercial banks.
"The final decision will come from our board members after they review the investigation report and the banks' explanations," said Kim Hyun-joo, a director at the FTC. "Nothing has been decided yet, including the date of the board meeting."
The banks denied the collusion allegation, saying they will express their opinions aggressively to the government.
"We have not colluded in setting CD rates. We will explain the issue actively to the FTC," said the Korea Federation of Banks in a statement.
Market watchers said that the FTC suspects that the lenders colluded in keeping CD rates at 3.54 to 3.55 percent for eight months from December 2011 to July 2012, though other interest rates had moved sharply during the same period. In fact, the yield of three-year sovereign bonds dropped to 3.29 percent in June 2012, from 3.48 percent in March 2012.
But, the banks said it was not because they colluded in setting a higher rate but because their issuance of CDs had declined at the time. They said the banks reduced the sale of CDs because the financial regulator stopped regarding CDs as deposits to follow international standards.
Lenders also argued that they have no rights in deciding the CD rate because it is calculated from data collected by the top 10 brokerage houses which trade CDs.
The FTC also accused the banks of conducting regular meetings of CD officials, suspecting they discussed ways to collude in setting the CD rate at the meetings. Banks admitted that they had such gatherings, but it was a meeting of low-profile officials who have no authority to decide the matter.
Lenders also argued that they have no reasons to raise the rate because it also applies to deposits, burdening them to pay more interest to customers.
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