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Photo = FSS |
[Alpha Biz= Paul Lee] Amid concerns that the impact of interest rate cuts by the Bank of Korea has not been reflected in loan interest rates, financial authorities have begun examining banks’ loan rate calculations.
According to reports from the financial sector on Sunday, the Financial Supervisory Service (FSS) requested data from 20 domestic banks on indicator and add-on rate changes, as well as the basis for these changes and the application of discount rates for individual borrowers and products. An FSS official stated, "The data will be used to assess the rationality of the effect of the base rate cuts on household loans."
Typically, loan interest rates are determined by adding an add-on rate based on indicator rates such as the COFIX or 5-year financial bonds, and subtracting the discount rate, which is determined by each bank based on factors like salary transfers or card usage. However, concerns have been raised about the lack of clear criteria for how these discount rates are set.
Since the Bank of Korea lowered interest rates twice last October, banks' discount rates have significantly decreased. According to the Korea Federation of Banks, Woori Bank’s discount rate dropped from 2.23% in September to 0.82% in December, a 1.41% point decrease, which was greater than the 0.11% point decrease in the add-on rate during the same period. Other major banks, including Shinhan, Hana, NH Nonghyup, and KB Kookmin, also reduced their discount rates.
As a result, the interest rate gap between loans and deposits at major banks like KB Kookmin, Shinhan, Hana, and Woori has increased by approximately 1.9 times compared to the previous year, and their interest income for the year rose 2.1%, reaching 34.36 trillion KRW.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
