Banks are pushing back against the Korea Fair Trade Commission's finding of collusion on real estate loan-to-value (LTV) ratios and are weighing next steps, including filing an administrative lawsuit. The banks say it was merely information sharing to measure the exact risk of the collateral, and that they did not gain windfall profits or cause consumer harm.
The Korea Fair Trade Commission (FTC) said on the 21st that KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Bank shared 7,500 pieces of nationwide real estate LTV information from Mar. 2022 to Mar. 2024, violating the ban on agreements to exchange information under the Fair Trade Act, and decided to impose a penalty surcharge of 272 billion won. Hana Bank, which had the largest related sales, will be fined 87.9 billion won. KB Kookmin Bank will be fined 69.7 billion won, Shinhan Bank 63.8 billion won, and Woori Bank 51.5 billion won. The Korea Fair Trade Commission (FTC) estimated the sales gained by the four banks through collusion at 6.8 trillion won.
According to the Korea Fair Trade Commission (FTC), the four banks lowered LTVs when the real estate LTV for a specific region or type was higher than other banks, believing it would make loan recovery more difficult. Conversely, when the LTV was lower than other banks, they raised the LTV, judging that their competitive edge in sales would weaken.
When the LTV goes down, the amount a borrower can receive decreases. The average LTV at the four major banks was 62.05%, lower than that of banks that did not participate in the information exchange (69.52%). The Korea Fair Trade Commission (FTC) determined that the four banks' collusion lowered LTVs, causing borrowers to take out loans on unfavorable terms and suffer harm.
The banks countered that they merely shared LTV information among themselves to assess the exact value of the collateral. A significant portion of the loans flagged by the Korea Fair Trade Commission (FTC) were to corporations. When extending loans secured by factories and other assets that corporations own, factories do not change hands often, making precise valuation difficult.
Some also say that sharing LTV information cannot be seen as leading to windfall profits or consumer harm. A banking industry official said, "Setting LTVs low means giving up an opportunity to make money," adding, "It is hard to understand the claim that customers were harmed simply because fewer loans were made." The official also said, "We placed more emphasis on stability, so calling it collusion seems like an 'malicious interpretation.'"
Within the banking sector, there are also calls to consider legal action, including an administrative lawsuit, in objection to the Korea Fair Trade Commission (FTC)'s decision. Another financial industry official noted, "Because it can be seen as imposing a penalty surcharge solely for sharing information, there appears to be room for a lawsuit."