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FTC reopens probe into major banks over alleged loan collusion

Published: 12 Feb. 2025, 10:19 Updated: 12 Feb. 2025, 17:28

SHIN HA-NEE
[email protected]

Shinhan Bank headquarters building in Jung District, central Seoul, on May 9, 2023 [NEWS1]

Korea’s antitrust watchdog has relaunched an investigation into the country’s four major banks — KB Kookmin, Woori, Shinhan and Hana — over alleged collusion in mortgage loan issuance.

The Fair Trade Commission (FTC) deployed inspectors to Shinhan Bank’s headquarters in central Seoul on Wednesday, according to industry sources. An on-site inspection also began at Woori Bank on Monday.

The regulator alleges that the four commercial banks unfairly profited by colluding on the terms and conditions for secured loans to individual and corporate clients, thereby limiting customers’ choices.

The FTC initially launched its probe in February 2023 and sent examiner’s reports to the banks in January of last year. Its commissioners ordered a reinvestigation in November, citing the need for additional verification surrounding the allegations.

The banks shared detailed information on the loan-to-value ratio (LTV) required for issuing loans, according to FTC. 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 borrowers can access.

The banks are suspected to have leveled the ratio to that of other banks when the gauge significantly diverged, limiting its upward movement. Capping the LTV at a lower level could nudge borrowers to opt for loans that grant higher amounts with a heavier interest burden.

The suspected banks admitted to sharing information but denied colluding to set mortgage loan conditions or make unfair gains.

A revision of the Monopoly Regulation and Fair Trade Act was enacted in 2020, adding concerted actions through the exchange of information as an unfair practice. If the suspected banks are found guilty, it would be the first application of the clause.

BY SHIN HA-NEE [[email protected]]