S Korea probes suspected loan rate fixing South Korean competition authorities are investigating suspected manipulation of a national benchmark loan rate by banks, in a case that has drawn local comparisons with the global controversy surrounding the fixing of the London Interbank Offered Rate (Libor). A spokesperson for the Fair Trade Commission told the Financial Times on Tuesday that the watchdog was looking into possible collusion among the brokerages responsible for setting the three-month certificate of deposit rate, used as a benchmark for a large proportion of consumer bank loans in South Korea. The investigation will heighten scrutiny of South Korea's financial sector, as the fallout continues from a recent crisis in the nation's savings banks that left small savers facing heavy losses. Edaily, a Seoul-based online publication, called the suspected rate-fixing case "the Korean version of the Libor scandal." Unlike Libor, however, which relies upon leading banks' estimates of the amount that they would be charged if borrowing from other banks just before 11am London time on a given day, the certificate of deposit rate is officially based on the average rate for 91-day credit instruments actually issued by ten of the leading Korean banks. Foreign banks, which have a relatively small presence in the country, are not involved in the calculation. The FTC is investigating whether some of the brokerages colluded to submit artificially high quotations, allowing them to make more lucrative returns from loans to consumers and businesses. This contrasts with the alleged fixing of Libor, in which banks are believed to have submitted artificially low lending costs in order to benefit their proprietary trading positions and to boost perceptions of their financial health. The suggestion that banks may have charged consumers artificially high interest rates on personal loans is especially damaging in a country with one of the world's highest levels of household debt. The 91-day certificate of deposit rate, published twice daily by the Korean Financial Investment Association, stood at 3.24 per cent on Tuesday afternoon, compared with a yield of 2.95 per cent on debt with the same term issued by the central bank. Last year an official investigation showed that many of South Korea's savings banks had made hidden bets on property with the assets of their savers, mostly middle-class retail investors, while running well below the regulatory capital adequacy ratio of 5 per cent. Many of these bets went bad and 20 banks have been shut since the beginning of last year. Nearly 90,000 savers were left nursing losses of $857m, although much of this was reimbursed by the state. Lee Sang-deuk, brother of president Lee Myung-bak, was arrested last week after allegations that he had received $500,000 from the chief executives of two of the savings banks in question, in exchange for political influence. Mr Lee denies the charges.