This article was featured on the ChosunBiz RM Report site on March 3, 2025, at 5 p.m.
The Fair Trade Commission has launched a re-investigation into allegations of collusion regarding the loan-to-value (LTV) ratios of KB Kookmin, Woori, Hana, and Shinhan banks. This means that key issues discussed at last year's plenary meeting are being subjected to verification again.
At that time, Fair Trade Commission examiners claimed that the banks shared LTV information to limit lending competition, causing consumer harm due to rising interest rates. In contrast, the banks countered that the LTV information was merely internal criteria related to lending authority and did not restrict market competition.
This re-investigation is expected to examine how valid the logic proposed by the banks at the plenary meeting is. The Fair Trade Commission will particularly focus on whether ▲sharing of LTV information actually influenced interest rates and ▲caused substantive harm to consumers.
◇ Fair Trade Commission: "Possible interest rate increase due to LTV collusion"
According to the financial sector on the 4th, the Fair Trade Commission recently dispatched researchers to the headquarters of Shinhan Bank, Woori Bank, KB Kookmin Bank, and Hana Bank to conduct on-site investigations. This investigation is a follow-up procedure to last year's decision by the Fair Trade Commission to review the case of 'unfair joint actions by the four major commercial banks.'
The core issue is whether the sharing of LTV information actually affected interest rates and loan limits. At the plenary meeting last November, Fair Trade Commission examiners pointed out that "the banks shared LTV information, aligning their lending conditions, which resulted in limited competition." However, the banks argued that "the LTV information was merely a reference for risk management."
According to the data secured by the Fair Trade Commission, it was confirmed that the banks received nearly 20,000 pieces of LTV information in hard copy and entered it manually. The examiners believe this indicates systematic usage beyond simple information sharing.
In the internal messages secured by the Fair Trade Commission, it was revealed that an executive reported to a responsible officer that, due to collusion issues, they could not share files and had to record everything in hard copy. The executive responded, "Thank you for your hard work." The Fair Trade Commission views this as evidence suggesting that the sharing of LTV information was conducted systematically.
Additionally, a person in charge at Shinhan Bank was found to have used terms such as "exchanging LTV information behind the scenes" and "mutual benefit behind the scenes" in internal messages. Hana Bank mentioned in conversations with Woori Bank that "we will also work on it" and "we will receive materials from Shinhan Bank and Kookmin Bank," while Woori Bank directly stated in conversations that it received LTV materials from Shinhan Bank.
The Fair Trade Commission is raising concerns over the fact that the banks adjusted LTV based on data from other banks rather than individual criteria. The examiners stated that the method of setting LTV shows a strong correlation among the banks and forms a consistent pattern.
For example, if Kookmin Bank's calculated LTV is lower than the average of other banks, it applies a method of increasing it, while Woori Bank is confirmed to adjust it within a ±10% range of the average of other banks. Hana Bank also maintains a method of increasing its LTV if it is lower than the average of other banks and decreasing it if it is higher. In the case of Shinhan Bank, it was investigated that it operated an internal criterion to maintain the LTV ranking at around third place, considering its relative position among competing banks.
The Fair Trade Commission examiners judged that the LTV information is a sensitive factor in terms of competition in the loan market. The gap in LTV among banks can influence 'borrower attrition' and 'new customer acquisition.' Notably, on-site staff also admitted that "LTV information is not disclosed to general loan customers, and without exchange among banks, it is difficult to grasp the overall market flow."
The Fair Trade Commission is also concerned about whether the sharing of LTV information led to an increase in interest rates. The examiners noted that "when the LTV decreases, the collateral value is assessed as higher, lowering the credit risk for borrowers, which in turn leads to lower interest rates," and they pointed out that "if banks universally maintain the LTV at a certain level, consumers will eventually have to tolerate higher interest rates."
◇ Banks: "Information sharing is merely for risk management"
On the other hand, banks argued that sharing LTV information did not limit market competition and had no impact on interest rates. They claimed that LTV information is merely a reference material for setting lending limits, with no direct correlation to interest rates.
In particular, representatives from Shinhan Bank emphasized that "the collateral loan limits are determined based on the government's LTV regulations, so the impact of adjustments of individual banks' LTVs on the final loan limits is minimal."
For instance, in Songpa District, Seoul, the government regulations limit the LTV ratio to 50%. Even if banks internally change LTV to 70% to 80%, the final loan limit is still applied at 50%. Based on this, banks argued that the impact of sharing LTV information on interest rates is minimal.
The banks also stressed that "information sharing is common across the industry, and it is difficult to prove substantive competition restrictions based solely on the synchronization of collateral recognition ratios."
However, the Fair Trade Commission believes that, based on the analysis of internal bank documents and reports from sales offices, there is a high likelihood that LTV was utilized as a crucial factor in actual lending competition. Some internal materials from banks contain statements such as "LTV adjustments are necessary to maintain competitiveness compared to other banks" and "lowering the LTV leads to a weakening of competitiveness."
If collusion is recognized in this case, it will become the first instance in the financial sector where 'information exchange collusion' is applied. However, banks continue to maintain that it is difficult to see the sharing of LTV information as directly leading to collusion.
To recognize collusion in this case, the Fair Trade Commission must prove that sharing LTV information influenced lending interest rates and limits and caused substantive harm to consumers. However, as the banks are strongly opposing, it is expected that it will take considerable time until a final conclusion is reached.
Meanwhile, the Fair Trade Commission also stated that the re-investigation into LTV collusion is not an unreasonable investigation. Moon Jae-ho, the director of the Fair Trade Commission's Cartel Investigation Bureau, said at a meeting with reporters, "There were new claims raised at the plenary meeting, so we issued a re-examination order to verify additional factual circumstances," and stressed, "This is absolutely not a forced investigation."