Banks off hook for CD collusionAfter four years of investigations, the government has tentatively let banks off the hook over suspicions they colluded to fix interest rates on certificates of deposits.
The Fair Trade Commission (FTC) Wednesday said it found no hard evidence to support the idea that six local commercial banks - KB Kookmin, Shinhan, Woori, KEB Hana, NH Nonghyup and Standard Chartered Bank Korea - violated the law in fixing CD interest rates.
“It was suspected that the six banks since 2009 agreed [among themselves] to set interest rates [on 91-day CDs] at the same level as the key CD rate announced by the Korea Financial Investment Association the day before,” said a FTC official. “However, the FTC has come to the conclusion that given the difficulty in verifying the allegations it was difficult to conclude there were any violations of the law.”
The antitrust agency said the banks operators did communicate among themselves about CD interest rates but it was difficult to prove that the conversations led to joint action to fix interest rates. Additionally, the group of bankers accused of gathering regularly to collude included bankers who didn’t specialize in that part of the business.
CD interest rates are a benchmark for setting interest rates on loans including unsecured loans, mortgages and even bank derivatives. A higher rate on CDs means more profits for banks on their loans.
The FTC started investigating the alleged collusion in July 2012 after growing complaints from borrowers that their interest rates stayed in the mid-3 percent range even though the Bank of Korea slashed the nation’s key interest rate.
This prompted the FTC to raid the headquarters of the banks.
The FTC said, however, it could reopen the case if new evidence surfaces.
The antitrust agency said the investigation took four years because it had to go through huge amounts of information to find evidence that would prove there were undisclosed agreements among the banks.
The commercial banks expressed relief.
“We have been trying to say there was no collusion for a very long time,” said an official at a commercial bank. “We’re glad that no matter how long it took, we have been cleared of the allegations.”
BY LEE HO-JEONG [firstname.lastname@example.org]