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| Financial Supervisory Service Governor Lee Bok-hyun, right, shakes hands with Suhyup Bank CEO Kang Shin-sook, at the headquarters of the Korea Federation of Banks in Seoul, Jan. 18 , before holding a meeting with leaders of major commercial lenders here. Yonhap |
By Lee Min-hyung
Commercial banks here have come under criticism for cutting their savings interest rates on a larger scale than those from loan products.
According to data from Korea's top five banks ― KB, Shinhan, Hana, Woori and NongHyup ― the average interest rate for their savings product with a one-year maturity was within a band from 3.36 to 3.6 percent as of Wednesday. This is a drop of more than 1 percentage point from November last year when they promised to offer annual returns of more than 5 percent for their major savings products.
Banks have promptly responded to financial authorities' call last year to reduce their deposit interest rates on fears that more capital is flowing to banks amid chilly capital market sentiment.
But they also remained conservative in cutting their loan interest rates, data from the Bank of Korea (BOK) showed. According to the central bank, commercial lenders' average mortgage loan rate in December came in at 4.68 percent, down 0.11 percentage points from the previous month. Their one-year maturity savings interest rate, however, fell with a bigger margin of 0.32 percentage points during the same period.
Reflecting on the growing complaints from customers over the widening loan-to-deposit rate gap, financial authorities decided Thursday to enhance the efficiency of customers' right to demand a loan rate cut when their credit ratings increase. Authorities and financial industry players set up a task force in November to fine-tune details on the introduction of the updated policy.
More customers are moving to exercise the right amid the sharply-rising interest rates, but they have voiced complaints that financial institutions are reluctant to accept the right.
Under the joint decision by the Financial Services Commission and the Financial Supervisory Service, financial firms will have to notify customers whose credit ratings have increased of the fact that they can exercise the right more frequently ― at least once every six months.
When financial firms do not accept the request for rate cuts, they have to specify the reasons in more detail, according to the latest decision by the financial watchdogs. Starting from the banking sector, the toughened rule will take effect from the end of this month.
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