LTV Collusion Round 2: Four Major Banks File Administrative Lawsuit Challenging FTC Fines

Four Major Banks Challenge FTC Collusion Ruling

Final Judgment to Be Made in Court

Verdict Expected to Take Time

Whether the four major commercial banks colluded in exchanging information on real estate loan-to-value (LTV) ratios will ultimately be determined in court. The four banks have challenged the Fair Trade Commission's (FTC) decision that "information exchange also constitutes collusion" and have filed an administrative lawsuit.

According to the financial sector on March 21, KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Bank filed a lawsuit with the Seoul High Court the previous day, seeking to overturn the FTC's penalty decision. An administrative lawsuit against the FTC's decision must be filed within one month from the date the written resolution is served. In effect, the deadline was March 23.

Previously, in January, the FTC determined that the LTV information sharing among these banks constituted collusion and imposed a total fine of 272 billion won. The FTC concluded that the information exchange hindered competition in the secured loan market and caused harm by keeping LTV ratios lower than other banks, thereby reducing loan limits for small and medium-sized enterprises and self-employed individuals.

Unlike the originally anticipated amount of around 1 trillion won, the actual fine was smaller than expected within the industry. However, the banks had already indicated that they would challenge the FTC's determination itself, arguing that sharing LTV information does not constitute collusion.

The banks maintain that they merely exchanged information as a risk management tool and did not gain any undue profits from lowering the LTV ratios. In the fiercely competitive corporate lending market, banks need to increase their LTV ratios and provide more loans to attract borrowers, which in turn leads to higher profits. Therefore, there is no benefit to be gained from lowering LTV ratios.

With the banks filing an administrative lawsuit, the judgment on "LTV information exchange collusion" will now be left to the courts. This case is drawing considerable attention not only in the financial sector but also across industries, as it is the first case since the 2021 amendment to the Fair Trade Act where information sharing has been deemed collusion. The court's decision could have significant implications for similar cases in the future.

Shinhan Financial Group, in explanatory materials for its upcoming shareholders' meeting on March 26, stated, "The approach of regarding LTV information exchange as a collusive act stems from a difference in understanding between the FTC and the financial industry—a view commonly shared within the sector," adding, "According to the opinions of multiple law firms, there is a general consensus that the FTC's ruling is likely to be overturned in administrative litigation."

Industry experts expect that it may take some time before the Supreme Court issues a final verdict. An industry source commented, "Looking at previous administrative lawsuits to overturn FTC decisions on collusion, it typically takes around four years," but also noted, "It is impossible to predict the exact duration of Supreme Court deliberations."

This content was produced with the assistance of AI translation services.