FTC probes four major banks for collusion on loan terms

Outside of a bank in Seoul on Jan. 3 [YONHAP]

Korea’s antitrust watchdog is investigating the country's four largest banks for potential collusion when extending loans.

The Fair Trade Commission (FTC) on Monday delivered a statement of objection to KB Kookmin, Shinhan, Hana and Woori, stating they unfairly gained profit from colluding the terms and conditions for the extension of secured loans to individual and corporate clients, according to local media reports.

The statement contains information on the relevant facts and legislation related to the allegation.

The FTC declined to comment on the matter.

The banks shared detailed information required for extending loans, like the loan-to-value ratio (LTV), to make sure customers cannot take out loans under more favorable conditions at other banks.

LTV is a lending risk assessment ratio that financial institutions examine before approving a mortgage. The gauge is used to determine the amount of loans that customers can access.

Banks determine the LTV ratios for different properties in different regions based on their respective algorithms. However, the suspected banks leveled the ratio to that of other banks when the gauge significantly diverged, limiting the upward movement of the ratio.

The LTV ratio at the four banks was between 5 to 7 percentage points lower than that of other banks that did not collude, according to a report from the JoongAng Ilbo.

Monday's statement is the latest restriction the authorities have imposed on banks since February last year, after they were heavily criticized by the president for reaping large profits at a time of high interest rates. The government has since called on the need for banks to redistribute their profits across society.

The FTC launched a probe into six major banks following the president's order, including NongHyup and the Industrial Bank of Korea.

The statement of objection was also delivered to the antitrust watchdog's committee, which will determine whether the suspected banks are guilty of the collusion and whether they should be fined for the act after hearing what the banks have to say. The commission consists of nine members, including the FTC chairperson Han Ki-jeong.

BY JIN MIN-JI [jin.minji@joongang.co.kr]