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(LEAD) regulator-bank collusion

(LEAD) Regulator slaps 272 bln-won fine on 4 major banks over alleged loan ratio collusion

(ATTN: ADDS more info in paras 5, 8)

By Kim Han-joo

SEOUL, Jan. 21 (Yonhap) -- The antitrust regulator said Wednesday it has imposed a combined fine of 272 billion won (US$183.7 million) on the country's four major commercial banks for allegedly colluding on real estate lending limits tied to loan-to-value (LTV) ratios.

The banks -- Shinhan Bank, Woori Bank, Hana Bank and KB Kookmin Bank -- are accused of exchanging internal documents related to LTV ratios and coordinating their lending limits, a practice that restricted competition in the mortgage loan market, according to the Fair Trade Commission (FTC).

The LTV ratio is a key regulatory tool used to curb household debt by limiting how much borrowers can take out in loans based on the value of their property used as collateral.

"Between a minimum of 736 cases and a maximum of 7,500 cases, the four major banks repeatedly exchanged detailed information on their LTV ratios over a long period whenever necessary," said Lee Sun-mi, a senior FTC official.

The FTC said the alleged collusion occurred from March 2022 to March 2024 and estimated the interest earnings generated through the practice at around 6.8 trillion won.

The information sharing allowed the banks to reduce uncertainty about competitors' business strategies and avoid competition on LTV ratios, enabling them to generate stable operating profits, the FTC said.

Because the four major banks account for about 60 percent of the country's real estate mortgage loan market, the similarity in their LTV ratios limited consumers' ability to choose among lenders, the watchdog added.

"Borrowers had little choice but to face limited options when selecting a bank," Moon Jae-ho, a senior FTC official, said, adding that it is realistically difficult to determine precisely how much damage people may have suffered as a result of the collusion.

The FTC said the alleged collusion had a particularly harmful impact on small and midsized enterprises and small business owners, as they typically have lower credit ratings, making it more difficult for them to raise funds through unsecured loans or to provide additional collateral.

As a result, such borrowers rely heavily on secured loans, meaning banks' decisions on LTV ratios have a significant influence on whether financing is available, the FTC aid.

The case marks the first application of a revised fair trade law that took effect on Dec. 30, 2021, which introduced a new provision banning anti-competitive collusion through the exchange of sensitive business information.

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