South Korean watchdog probes major banks for rate-rigging
South Korea's anti-trust watchdog has launched a probe into four major commercial banks on allegations that the lenders colluded on setting deposit and lending rates after the central bank's policy rate cut, media reports said.
The Fair Trade Commission (FTC) sent six investigators each to Kookmin, Woori, Shinhan and Hana banks Tuesday and Wednesday to look into whether the banks engaged in rigging rates on deposit and lending, such as the 91-day certificate of deposit (CD) rate and the cost of funds index (COFIX) rate, reported Xinhua.
The CD rate, a benchmark for lending rates, is published by the Korea Financial Investment Association twice a day after excluding the highest and lowest rates from those offered by 10 local securities firms. The COFIX rate is a benchmark for mortgage loans, published by the Korea Federation of Banks once a month, reflecting the cost of funding of deposit takers.
The investigators reportedly confiscated records of email, documents and messenger dialogue of those in charge of deposit and lending at the banks to figure out whether they colluded with their counterparts at other banks to fix rates illegally.
The investigation came on allegations that local banks lowered deposit rates sharply after the Bank of Korea (BOK) cut its policy rate by a quarter percentage point to 2.25 percent earlier this month, while cutting rates on lending by a relatively small margin.
The relatively smaller cuts in lending rates would boost interest margin for banks, while raising borrowing costs for companies and households.
(Posted on 27-08-2014)