South Korea's financial watchdog yesterday said it had launched a probe into allegations that Citibank Korea Inc, the local unit of US banking giant Citibank, has cheated customers out of millions of dollars whilst selling mortgage loans.
Citibank rejected the allegations as "groundless."
"The Financial Supervisory Service (FSS) is investigating the allegation and it will take proper measures in accordance with the outcome of the probe," the FSS said in a statement.
documents
The FSS said it told Citibank Korea on Wednesday to submit documents, including the protocols for the loans in question.
The investigation came after the union of KorAm Bank, which was absorbed by Citibank in November last year, filed a complaint with a local prosecutors' office asking for a criminal investigation of Citibank Korea.
The union charged that the bank had skimmed off 7.4 billion won (US$7.1 million) from customers by applying fixed rates to floating-rate mortgage loans between the end of 2001 and early this year.
interest dispute
Citibank Korea allegedly failed to lower interest rates on the loans when rates began to fall from late 2002, according to the union.
Citibank Korea rejected the allegations, saying in a statement that interest rates on mortgage loans are not automatically linked to money market rates but are subject to changes in other factors including the cost of raising funds and other expenses.
opposition
Citigroup bought KorAm Bank in April last year before merging it with with its South Korean unit in November, launching Citibank Korea Inc.
Since then, Citibank Korea has been dogged by labor disputes led by former employees of KorAm Bank against a backdrop of increasingly vocal local opposition to foreign business influence in the country.
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