Fair Trade Commission Launches Reinvestigation into 'LTV Collusion'... Banks "Watching Closely"

Fair Trade Commission Conducts On-Site Investigation at Shinhan and Woori Bank Headquarters
"Did Sharing LTV Information Restrict Competition? We Disagree"
"Information Sharing Was for Risk Management Purposes"

The Fair Trade Commission (FTC) has begun reinvestigating suspicions of collusion over the Loan-to-Value ratio (LTV) among the four major domestic banks, starting with Shinhan and Woori Bank, drawing close attention from the banking sector. The case reached the FTC plenary session last year but was concluded with a decision for reexamination, citing the need for additional fact-finding. While the banking sector views this as a predictable step, they maintain a stance of grievance.

According to the financial industry on the 12th, the FTC has dispatched personnel to the credit departments at the headquarters of Shinhan Bank and Woori Bank to conduct on-site investigations starting this week. It is reported that they will secure documents, contracts, and email records of responsible staff that can prove the exchange of LTV information. KB Kookmin Bank and Hana Bank are also expected to undergo on-site investigations soon.

The FTC believes that the four major domestic banks shared over 7,500 pieces of LTV-related regional information from 2020 to 2022, thereby hindering competition. By similarly lowering regional loan conditions to restrict loan limits, they allegedly induced higher-interest unsecured loans, gaining profits through interest income. This is the first case applying the 'information exchange collusion' regulation introduced after the 2020 amendment of the Fair Trade Act.

While the banking sector is closely monitoring the FTC’s reinvestigation, it is expressing dissatisfaction. They argue that it was merely a simple exchange of information to improve work efficiency, not collusion, and that no unfair profits were made. A representative from a commercial bank said, "Adjusting LTV is not loan competition but one of the risk management measures," adding, "It is unacceptable that the FTC is raising issues about lowering LTV when financial authorities regulate LTV citing loan soundness." Another official stated, "Loan interest rates move according to the base rate and market rates, and each bank has different additional rates," emphasizing, "It is excessive to connect interest rate collusion solely based on LTV."

The FTC plans to conduct interviews with related parties based on the materials secured during the on-site investigation and then rewrite and send the review report. There are also expectations that if the allegations are confirmed, fines amounting to hundreds of billions of won could be imposed.