By Lim Seung-gyu and Se Young Lee (Reuters)
SEOUL, July 17 – South Korea’s anti-trust agency is investigating at least nine local brokerages on suspicion of collusion in setting three-month certificate of deposit rates, which are used for a wide range of financial transactions, company officials and sources said on Tuesday.
“At some securities firms, Fair Trade Commission officials visited in the morning then left. At others, officials appear to be still investigating,” a spokesman at one brokerage said, while asking not to be identified.
KB Investment & Securities, KTB Investment & Securities , LIG Investment & Securities, Hanwha Securities , E ugene Investment & Securities < 0 01200.KS>, Daishin Securities <00 3540.KS>, H MC Investment Securities <00 1500.KS> and Bookook Securities <001 270.KS> con f irmed they were under investigation by the Fair Trade Commission.
A source with direct knowledge of the matter said Leading Investment & Securities was also under investigation.
Officials at the anti-trust agency would not confirm the probe, which comes as the global financial industry has been rattled by the suspected manipulation by global banks of Libor benchmark international lending rates.
No foreign firms were believed to be under investigation in Korea.
Analysts said the move appeared aimed at making the CD rates better track falling market interest rates so that borrowers, including households struggling to pay off heavy debts bearing CD- linked interest rates, can share the benefit.
“If they don’t change much, regulators as well as the consumers can take issue with this, given that market rates have fallen sharply as of late but the CD rates do not reflect this decline,” said Lee Jae-youn, senior research fellow at the Korea Institute of Finance.
Officials at several of the brokerages under investigation said the probe was unlikely to lead to an industry-wid e scandal, an opinion also reflected in the relatively calm reaction from the local stock market.
Share prices of securities companies fell only slightly after the report, with the sub-index for the sector finishing down 0.4 percent, compared with gains of 0.2 percent for the broader South Korean market.
A spokeswoman at the country’s financial markets regulator, Financial Supervisory Service (FSS), said it was aware of the investigation, but has not decided whether to join the probe.
Commercial banks issue CDs to secure funds for lending and use the CD rates as a benchmark for setting their lending rates. Therefore, they could benefit when the rates are quoted at unusually high levels.
The CD rates, which apply to a wide range of financial transactions in Asia’s fourth-largest economy from lending rates at banks to some derivatives products, had stayed at relatively high levels despite falling interest rates.
Bank loans amounting to some 370 trillion won ($322.59 billion), or just more than one-third of the country’s outstanding bank loans, were using the CD rate as a benchmark rate as of end-September last year, data from the FSS showed.
The CD rate was quoted at 3.24 percent at the end of trade on Tuesday, compared with treasury bonds maturing in three months yielding 2.94 percent. The CD rate was around 25 basis points higher for most of June.
The Korea Financial Investment Association publishes official CD rates twice a day based on quotations submitted by 10 brokerage houses, including five of the nine now confirmed to be under investigation.
Hana Daetoo Securities Co, Dongbu Securities Co, Woori Investment & Securities Co and Mirae Asset Securities Co said they were not under investigation, while officials at Meritz Securities Co could not confirm.
Woori, Hana, and KB, which has confirmed it is under investigation, are either affiliates of or belong to the same parent groups of three banks: Woori Finance Holdings Co , Hana Financial Group Inc, and KB Financial Group Inc..
The names of the 10 brokerages which contribute quotations were listed on the association’s website (http://www.kofiabond.or.kr).
Eugene, Daishin, HMC and Bookook were not on the latest list of contributing brokerages but had submitted quotations in the past. The list of contributors is changed periodically. ($1 = 1146.9500 Korean won) (Additional reporting by Joyce Lee; Writing by Choonsik Yoo; Editing by Kim Coghill and Simon Cameron-Moore)