Major banks face antitrust scrutiny over lending limit collusion

Korea Herald

17-02-2025

South Korea's antitrust watchdog is pushing ahead with its reinvestigation into four major banks over their possible engagement in collusive activities by exchanging lending limit information.
The Korea Fair Trade Commission sent investigators to the headquarters of KB Kookmin Bank and Hana Bank on Monday following its on-site probe into Woori Bank and Shihan Bank last week.
The country's top four commercial lenders allegedly shared 7,500 loan-to-value (LTV) ratio data from 2020 to 2022 then lowered the lending risk assessment ratio to a similar level, thereby limiting market competition and taking illicit gains.
The LTV ratio is a measure used by lenders to assess a loan's risk. It is calculated by dividing the loan amount by the appraised market value of the asset being used as collateral.
The watchdog believes the banks in question intentionally set their respective LTV ratios at low levels, which could force some borrowers to rely on credit loans with relatively high interest rates.
Given the different timings and trends in which each lender changed their LTV ratios, the banks have denied the allegations.
However, the FTC is focusing more on whether the banks agreed to collude than the concerted actions that allegedly followed.
'The figures (LTV ratios) may not be perfectly matched, but an agreement (between banks) can be seen as illegal. It is difficult to say that they have no problem just because they took different actions or some did not fully implement what they agreed on,' said an official at FTC's Cartel Investigation Bureau.
The banks could face hundreds of billions of won in fines if convicted of the charges in accordance with the fine rate of up to 20 percent of revenue from the business related to anti-competitive activities. The interest income of these four banks in 2022, the period of alleged collusion, exceeded 40 trillion won ($27.76 billion).
Some market watchers have also pointed out that the watchdog's accusation is excessive, saying lowering the LTV ratio does not directly trigger increases in borrowing rates.
'There are various factors affecting rates, not just LTV. But if the ratio has any influence, it's worth taking a look at,' the FTC official said.
Having first opened in February 2023, the collusion case was expected to conclude in November 2024, but it was decided to revisit the case during the FTC's plenary meeting, which cited the need for further confirmation of claims from investigators and banks.
'The FTC will swiftly complete the reinvestigation and put the case before the committee. After that, the banks will go through the process of vindication and the final decision will be made at the plenary session of the FTC,' the agency said in a statement.
If the four banks are proven to have conspired over the LTV ratio, it will be the first time for the FTC to impose sanctions on charges of "information exchange collusion."
Through the Korean Fair Trade Act amended in 2020, the watchdog established a legal basis that views concerted actions through information exchange, such as prices and production volume between businesses, can be presumed as collusion.