The four major commercial banks — KB Kookmin, Shinhan, Hana, and Woori — are reviewing a plan to reflect the Korea Fair Trade Commission's penalty surcharge of more than 270 billion won for loan-to-value (LTV) collusion in their fourth-quarter results last year. With the banks expected to post record earnings last year, they have judged it better to book the penalty early in their results.
According to the financial sector on the 24th, the four banks are discussing reflecting the penalty surcharge imposed by the Korea Fair Trade Commission (FTC) as a provision in the fourth quarter of last year. The FTC said the banks colluded by sharing LTV information and earned a total of 6.8 trillion won in interest income over two years, imposing a penalty surcharge of 272 billion won. By bank, Hana Bank 86.9 billion won, KB Kookmin Bank 69.7 billion won, Shinhan Bank 63.8 billion won, and Woori Bank 51.5 billion won.
The Korea Fair Trade Commission (FTC) penalty surcharge must be paid regardless of an objection or administrative lawsuit. Under the Fair Trade Act, the penalty surcharge must be paid in full within 60 days from the date of receiving the payment notice. If the penalty surcharge is not paid by the deadline, an additional charge is imposed starting the following day.
Even if the banks pay the penalty surcharge in the first quarter, they plan to reflect the provision in the fourth-quarter results last year. As the four major financial holding companies are expected to post record earnings last year, reflecting the provision is not expected to deliver a major shock to results. The banks are generating more than 1 trillion won in net profit each quarter, so if the provision is reflected, the fourth-quarter results are estimated to decrease by less than 10%.
There is also the calculation that it is better to reflect the LTV collusion penalty surcharge early, as a decision on the roughly 2 trillion won penalty surcharge for misselling of Hong Kong H-index equity-linked securities (ELS) is expected in the first or second quarter. However, some banks are said to be also considering reflecting it in first-quarter results.
A banking industry official said, "There is no problem with reflecting the Korea Fair Trade Commission (FTC) penalty surcharge in fourth-quarter results," and noted, "It is advantageous to reflect the provision as quickly as possible."