When it lowered its key interest rate by 25 basis points last week, the Bank of Korea aimed at giving the rapidly weakening economy a shot in the arm. The central bank, which cut its 2012 growth forecast from 3.5 percent to 3 percent, said the rate cut would increase growth by 0.02 percentage point this year and another 0.9 percentage point next year.

The central bank also wanted to reduce households’ debt burdesn. The Financial Supervisory Service said the rate cut would reduce annualized household interest payments by 1 trillion won.

But the estimates by the central bank and the FSS would be wide of the mark if the central bank’s rate cut did not have the intended effect on floating rates. This possibility cannot be ruled out, given that the benchmark for floating rates is suspected of being manipulated.

The Fair Trade Commission, the nation’s antitrust regulator, is investigating brokerages on suspicion of colluding in setting the rates of certificates of deposit (CD) with three-month maturity ― the benchmark for floating rates, including those for mortgages. The probe comes at a time when regulators are investigating leaders in the international banking industry on suspicion of manipulating LIBOR, the London Interbank Offered Rate.

The Korea Financial Investment Association publishes official CD rates twice daily based on quotations by 10 brokerages. CDs are issued by seven commercial banks and their rates are used as the benchmark for setting the lending rates at not just those banks but other commercial banks as well. As such, all commercial banks would benefit if the rates were quoted at unwarrantedly high levels.

This is the reason that the antitrust agency’s current investigation is not limited to brokerages. Instead, it has been expanded to include some of the seven commercial banks. It goes without saying that all those found to have engaged in rate fixing must be held accountable.

For a long time, there has been much talk about the problem of using the flawed CD rates as the benchmark. Moreover, the long-held suspicion of collusion among the banks and brokerages was bolstered by the CD rate that remained unchanged, at 3.54 percent, in the three months from April 9 to June 11.

The CD rate that made no change was in sharp contrast with that of the three-month monetary stabilization bonds issued by the central bank. Their rate dropped from 3.4 percent to 3.25 percent during the cited period. The rate of three-year treasury bonds also dropped, from 3.5 percent to 3.19 percent. The changes in non-CD rates pointed to possible CD rate fixing.

If CD rates have been rigged, the magnitude of fraud would be amazing, given that outstanding CD rate-linked household loans amount to as much as 453 trillion won. This seismic scandal would undoubtedly undermine public trust in the banking industry.

In addition, it has long been argued that CD rates fail to accurately reflect the cost of borrowing in the market. The reason is that the outstanding CDs, which stand at 1.6 trillion won now, account for a mere 0.1 percent of the total deposits with commercial banks. No wonder pressure is mounting on the financial authorities to select an alternative to the CD rates as a benchmark. Among the promising candidates are the rates of repurchase agreements ― short-term loans in which treasury bills serve as collateral.

Now the question is: Why is the antitrust regulator only now, all of a sudden, investigating brokerages and commercial banks on suspicion of manipulating the CD rate? Does it want to deflect public criticism that may be triggered by British bank Barclays’ admission to colluding with other banks in manipulating LIBOR?

Again, what has the Financial Supervisory Service been doing all this while? Will it say it cannot start an investigation of its own unless the antitrust agency proves that commercial banks were involved in the rate-fixing scam? What will the prosecution say about a public outcry for a criminal investigation?

Disciplinary action that the three agencies will have to take should serve to keep the nation from being drawn into any such banking fraud again and restore public trust in its financial system.