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| Many household purchases in South Korea are linked to certificates of deposit |
A South
Korea financial regulator has started an investigation into alleged interest
rate rigging by some of the country's banks.
The Fair
Trade Commission is looking at possible collusion over setting certificates of
deposit (CD), used as a benchmark to set lending rates.
Kookmin,
Shinhan and Hana are among the banks being investigated.
It follows
the Libor-rigging scandal involving Barclays and possibly several other banks.
Fine threat
Brokerage
firms, which report CD rates twice a day, are also under suspicion. A CD is a
way of saving with a fixed interest rate and maturity sold by banks and
circulated in the secondary market by brokerages.
Financial
firms benefit from a high CD rates as many household loans are linked to them.
They are frequently used to help South Korean's buy homes.
"If
the investigation finds collusion, there will be significant fines. Even if
there was no collusion, it's highly likely that the government's motive behind
the investigation is to lower household lending rates by inducing a fall in CD
rates," said Taurus Investment analyst Andy Lee said in a research report.
The Reuters
news agency reported that there were no indications that any foreign-based
financial firms had been implicated in the investigation.
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