South Korea’s Fair Trade Commission said on Tuesday it decided to impose corrective orders and total fines of 272 billion won on four major commercial banks - KB Kookmin Bank, Shinhan Bank, Woori Bank and Hana Bank - for restricting competition by exchanging and using information related to loan-to-value ratios, a key term in property-secured loans.

The watchdog said the banks frequently shared LTV information applied by property location and type over a long period.

It said the number of information exchanges ranged from at least 736 to as many as 7,500 by bank. It said working-level staff, aware of potential legal violations, were found to have removed traces by destroying documents and delivering information in person.

The commission also confirmed that handovers were made to ensure information exchanges continued even when the people in charge changed. It said the sanctions cover conduct after December 2021, following implementation of the amended fair trade law that introduced a ban on competition-restricting information exchanges.

The banks systematically reflected the shared information in LTV adjustments. When their LTV was higher than rivals, they lowered it citing loan recovery risks, and when it was lower, they raised it out of concern over customer losses. In the process, competition through LTV was effectively avoided.

As a result, the four banks’ LTV levels stayed similar over a long period, the watchdog said. It said the banks account for about 60 percent of the property-secured loan market and borrowers suffered reduced choice of banking partners. As of 2023, the four banks’ average LTV was 7.5 percentage points lower than non-colluding banks such as IBK Industrial Bank of Korea, NongHyup Bank and Busan Bank, and the gap widened to 8.8 percentage points for non-housing properties such as factories and land.

The commission said the action was a case of detecting and sanctioning a long-standing competition-restricting practice in the financial sector, and would contribute to protecting financial consumers and improving funding conditions for small and medium-sized companies and small merchants. It said it was also significant as the first case in which the amended fair trade law’s ban on collusion through competition-restricting information exchanges was applied.