Value context and insight. lkm@koreatimes.co.kr
Banks unnerved by FTC probe into collusion on secured loans
Fair Trade Commission Chairman Han Ki-jeong / Yonhap
By Lee Kyung-min
The country’s top four commercial lenders are on alert over an investigation by the Fair Trade Commission (FTC) into years of alleged collusion whereby their terms and conditions for secured loans were maintained at similar levels to limit competition, according to market watchers, Monday. They are KB Kookmin, Shinhan, Hana and Woori.
Most at issue is whether years of the industry practice will be recognized as “implicit collusion,” as defined by the revised FTC rule.
The antitrust agency in 2021 revised administrative codes to include “implied or implicit understanding of anti-competitive actions” as grounds for punishment. Previously, only explicit communications between parties of interest was punishable.
Tens of billions of won in fines will likely be in store for each of the four banks, coupled with indictments.
According to industry sources, the antitrust agency has sent review reports to the four lenders. Specified were their years of undue profits gained after sharing loan-to-value conditions, among other intricate lending rules of secured loans sought by retail and corporate borrowers.
“We are closely monitoring the situation,” an official of a bank said. “We think we will be able to provide explanations in due time.”
The agency’s move concludes months of investigations into the four lenders, as directed by President Yoon Suk Yeol who called for an end to anti-competition practices in the banking industry last February.
The interests of oligarchic banks remain unchallenged, he said at the time, despite the public nature of their financial services.
The agency in the same month began an on-site investigation into the four as well as NH NongHyup Bank and state-run lender, the Industrial Bank of Korea but the latter two were excluded.
The initial focus was the alleged collective fixing of the borrowing rates, but the latest report had no mention of that.
Tampering with borrowing rates is an accusation that is serious in nature, according to an industry official.
“Firstly, the financial authorities would have identified had it happened,” the official said. “The market rates are determined by changes in interest rates. Similar FTC probes in 2009 and 2012 into banks’ rate fixing allegations bore no results.”
The tightening scrutiny of banks is the continuation of the Yoon administration’s “mutual growth” push to turn the tide against the souring of his public support ahead of the April general election.
Last month, the banks presented a combined 1.6 trillion won ($1.2 billion) in financial aid whereby up to 3 million won in paid interest will be returned to about 1.87 million small merchants who borrowed from commercial lenders.
The country’s five commercial lenders donated a combined 411 billion won last year, up more than 65 percent from the previous year.