By Kim Jae-won
Four years after investigating allegations that six banks colluded to increase benchmark interest rates for mortgages, the Fair Trade Commission (FTC) has ended up empty-handed after failing to prove the accusation.
The FTC said Wednesday that its board of directors had decided to terminate its investigation into KB Kookmin, NongHyup, Shinhan, Woori, Hana and Standard Chartered banks because they could not find sufficient evidence to prove their rigging of certificate of deposit (CD) rates.
A CD is a financial instrument sold by banks and circulated in secondary markets by securities firms. Most bank mortgages are tied to CD rates.
“It was difficult to confirm the suspicions of rate-rigging because the evidence was not strong enough to verify this,” said the commission in a statement. “We launched the investigation as the banks seemed to have joined hands to raise the rate, but the evidence was insufficient to prove that they violated the Antitrust Law.”
The FTC has now come under fire with questions being raised on its ability to investigate financial cases.
The banks said that they were relieved by the decision, but criticized the antitrust agency for making them spend time and money on defending themselves.
“We paid a lot to a law firm to get consultation services in the case,” said a spokesman for one of the six lenders, asking not to be name. “I am doubtful whether the FTC knows how interest rates are decided on by the market.”
The FTC noted that it could resume the investigation if it finds any stronger evidence in the future, however, market watchers said that this was nothing more than an excuse to cover up its misunderstanding of the process in which interest rates are decided on by the market.
The suspected CD rate rigging case was once referred to as the Korean version of the Libor scandal, a series of fraudulent actions connected to the London Interbank Offered Rate, or Libor. But, now the commission has closed the case through a lack of evidence, it is drawing criticism that it launched the investigation abruptly without proper understanding.
The FTC suspected that the six banks had colluded to rig the CD rate at a higher level than the market price between 2009 and 2012, before the central bank started an expansionary monetary policy in 2012.
The average bank deposit rate fell about 0.3 percentage points between November 2011 and July 2012, but the CD rate dropped 0.01 of a percentage point over the same period. A higher CD rate than the bank deposit rate brings the banks a larger interest margin.
With growing public complaints in 2012, the FTC began looking into suspected collusion among the banks to fix interest the rate on CDs. Four years later, however, the watchdog has cleared the banks of the allegations, which had led many local civic groups to file class action suits against the lenders.