[Column] Fair Trade Commission's 'LTV Collusion' Reinvestigation, Avoiding Being Called a 'Foolhardy Move'

Doubts Over the Credibility of the Fair Trade Commission's Investigation
Coordination of Policy Directions Between Government Agencies Comes First

The Fair Trade Commission has once again targeted the suspicion of 'collusion on Loan-to-Value (LTV) ratios' among the four major domestic banks (KB Kookmin, Shinhan, Hana, and Woori Bank). Since last week, at least three to four investigators have been dispatched to the loan departments at each bank's headquarters to conduct on-site investigations.

As the Fair Trade Commission sharpens its blade again, voices inside and outside the banking sector immediately call it a 'reckless move.' It has been two years since the first investigation in February 2023, yet no definitive conclusion has been reached, and the case has returned to square one. The fact that the investigation started from President Yoon Suk-yeol's 'mouth,' and after reviewing everything from deposit and loan interest rates to fees, the final target was 'LTV information sharing,' also raises doubts about the sincerity of the investigation. The phrase 'pre-determined investigation' is not used without reason.

Whether LTV can even be a subject of collusion is also a matter of debate. The upper limit is already set by policy, and the information can be confirmed with just a little effort. It is merely reference material, and the timing and trends of LTV adjustments vary. While it is not commendable that banks have habitually shared information, it is somewhat far-fetched to view this as a strong collusion that restricts market competition.

The claim that unfair profits were gained also needs to be examined. Ultimately, banks lowered the LTV. Banks make money by raising LTV to increase loan limits. Lowering the LTV goes against the banks' interests. This is why both the Fair Trade Commission's claims of collusion and unfair profits are hard to accept. The fact that the Fair Trade Commission has to repeatedly explain that 'there is no lack of objective evidence' and 'the investigation is not insufficient' indicates that the connections are weak.

The Fair Trade Commission's judgment that lowering LTV and reducing loan limits is wrong conflicts with the Financial Services Commission's policy stance to manage the total volume of household loans, causing confusion. A representative from a commercial bank who attended the plenary session last November said, "I could only laugh bitterly, wondering whose tune we are supposed to follow." The Fair Trade Commission and the Financial Services Commission say it is 'an issue that requires no consultation.' This means they do not intend to infringe on each other's domains. However, differing policy directions among ministries is another matter.

Before accelerating the re-investigation of LTV collusion, the government must first coordinate policy directions between agencies. It is essential to re-examine whether the existing logic and evidence are sufficient. If the case is concluded as collusion and fines are imposed as it stands, it could only cause controversy. To fulfill its role befitting its status as the 'economic prosecutor,' the Fair Trade Commission must maintain the credibility of its investigation results.

"When I came to work in the morning, only the monitor was left on the desk. All work stopped during the investigation." This is a recollection from an employee who was part of the team during the 2012 investigation into collusion on CD (Certificate of Deposit) interest rates. The Fair Trade Commission ended the deliberation process without finding evidence to prove collusion. Since it ended with no charges, did the banks win? While the banks were under investigation for over three years, they suffered not only work paralysis but also tremendous damage to their credibility. It would be no different now.