South Korea widens rate-fixing probe, bank shares fall

Wed Jul 18, 2012 11:58pm EDT
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By Joyce Lee and Se Young Lee

SEOUL (Reuters) - South Korea's anti-trust agency, probing suspected collusion in setting three-month rates, has inspected offices of the local unit of Standard Chartered PLC (STAN.L: Quote) and three local banks as part of the investigation, the four banks said on Thursday.

Media officials at Standard Chartered Bank Korea, Busan Bank, Daegu Bank and Nonghyup Bank said officials from the Fair Trade Commission (FTC) conducted inspections of their offices on Wednesday, when four bigger local banks already confirmed they were under investigation.

The banks gave no further details.

An FTC spokesman said on Thursday the agency had investigated 9 banks and 10 brokerages since Tuesday over suspected collusion in quoting the official certificate of deposit (CD) rates substantially high even when other market rates fell. He did not identify the firms by name.

Officials at the country's top four local commercial banks -- Kookmin Bank, Woori Bank, Shinhan Bank and Hana Bank -- said on Wednesday that they were part of the FTC's widening probe into how certificate of deposit rates were quoted. The identity of the ninth bank being investigated by the FTC is not known.

Shares of banks and their holding companies slid on concerns they could face fines or at least shrinking profit margins as a result of the investigations, if not heavier penalties on their overall operations, analysts said.

The sub-index for banks and their holding companies .KRXBANK trading on Seoul's main stock exchange fell 2.2 percent as of 11.34 p.m. EDT on Wednesday, in stark contrast to the broader market's .KS11 1.9 percent rise.

The CD rate has been South Korea's benchmark money market rate used in a massive amount of financial transactions ranging from mortgage loans to financial derivatives but issuance of the paper has declined sharply in recent years.   Continued...