SEOUL, July 1 (Yonhap) -- The financial regulator will launch a probe into allegations that local banks and brokerage houses rigged interest rates on certificates of deposit (CDs) at the request of consumers, its officials said Monday.
A total of 205 financial consumers, under the support of the Korea Consumer Agency, plan to lodge an application at the Financial Supervisory Service (FSS) for an investigation into the alleged CD rate fixing, first raised by the country's anti-trust watchdog in July last year, according to FSS officials.
A CD is a financial instrument sold by banks and circulated in secondary markets by securities firms. Most bank mortgage loans are tied to CD rates, but sales of CDs have fallen since 2010 due to the government's tougher regulations on the loan-to-deposit ratios.
In July last year, the Fair Trade Commission (FTC) began looking into suspected collusion among financial companies to fix interest rate on CDs, which serve as the benchmark lending rate for bank loans.
But as the FTC probe has lost steam, it led consumers to submit a request by themselves to the FSS to continue the investigation, the consumer agency said.
The consumer group claims that bank users have paid additional interests of 1.6 trillion won (US$1.4 billion) annually since 2010 due to the rate fixing.
"We plan to look into details of the request. If we discover that banks have earned unfair profits, we will have them compensate consumers for damages," an FSS official said.
The watchdog's probe followed similar investigations underway in the United States and Britain into banks, including Barclays, for their alleged involvement in manipulating the London Interbank Offered Rate or Libor, a benchmark interest rate in the global financial market last year.
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