Seoul: The antitrust regulator announced a significant enforcement action on Wednesday, imposing a combined fine of 272 billion won (US$183.7 million) on South Korea's four major commercial banks. These financial institutions are accused of colluding on real estate lending limits related to loan-to-value (LTV) ratios, a move that allegedly restricted competition in the mortgage loan market.
According to Yonhap News Agency, the banks involved, Shinhan Bank, Woori Bank, Hana Bank, and KB Kookmin Bank, are said to have exchanged internal documents concerning LTV ratios, coordinating their lending limits in a manner that stifled competition. The Fair Trade Commission (FTC) reported that this practice allowed the banks to maintain stable operating profits by reducing uncertainty about competitors' strategies.
The LTV ratio serves as a regulatory measure to control household debt by limiting the amount borrowers can secure based on the collateral value of their property. A senior FTC official, Lee Sun-mi, noted that the banks exchanged detailed LTV ratio information in numerous instances, ranging from a minimum of 736 cases to a maximum of 7,500 cases, over a prolonged period.
The alleged collusion, which took place between March 2022 and March 2024, is said to have generated interest earnings of approximately 6.8 trillion won. The FTC emphasized that this information sharing reduced competition and limited consumer choice, as the four banks control about 60 percent of the country's real estate mortgage loan market.
Moon Jae-ho, another senior FTC official, highlighted the adverse impact on borrowers, particularly small and midsized enterprises and small business owners. These groups, often reliant on secured loans due to lower credit ratings, were significantly affected by the banks' coordinated LTV decisions.
This case is notable as it marks the first use of a revised fair trade law, effective from December 30, 2021, which prohibits anti-competitive collusion through the exchange of sensitive business information.