Busan Bank reduces deposit interest rates on the 18th
Kyongnam Bank also lowered it by up to 0.75%P.
There is growing interest in curbing household lending.
Banking sector is concerned about the widening interest rate gap between deposits and loans
Deposit and savings interest rates in the banking sector have begun to decline. While commercial banks are unable to lower deposit and savings interest rates despite the Bank of Korea’s base interest rate cut due to criticism of ‘interest business’, local banks have taken steps to preemptively lower deposit interest rates. As mortgage loan interest rates are rising amid the financial authorities’ policy of suppressing household debt, the deposit-loan interest rate gap (difference between deposit interest rates and deposit interest rates) in the banking sector is expected to widen.
According to the financial sector on the 22nd, Busan Bank has lowered the interest rates on major incoming products by 0.15 to 0.35 percentage points since the 18th. The interest rate for ‘The Level Up Term Deposit’ with a maturity of 6 months was lowered by 0.15 percentage points from 3.1% per year to 2.95% per year. The interest rate for ‘BNK My Deposit’ was also lowered by 0.15% points from 2.7 to 2.9% per year to 2.55 to 2.75% per year depending on the maturity (1 to 11 months). Interest rates for the 100-year-old silver savings account with a one-year maturity (-0.35% point) and pet savings account (-0.2% point) were also lowered.
Kyongnam Bank lowered deposit and savings interest rates by up to 0.75% points on the 17th. The interest rate for ‘Manimani Term Deposit’ was lowered by 0.25% points for maturities of 24 months or less, and the interest rate for ‘Security Pension Deposit by My Side’ was also lowered by 0.2% point from 3.1% per year to 2.9% per year for one-year maturity. For the ‘Mani Mani Free Savings’, with a maturity of 5 years, the interest rate was lowered by 0.75 percentage points from 3.55% per year to 2.8% per year.
Busan Bank and Gyeongnam Bank’s decision to cut deposit interest rates took place 6 to 7 days after the Bank of Korea lowered its base interest rate on the 11th of this month for the first time in 38 months. On the other hand, the four major commercial banks, including Kookmin, Shinhan, Hana and Woori, are not lowering the interest rates on major deposit products even after the base rate cut. Commercial banks have recently been raising interest rates on major loan products such as mortgage loans to curb the increase in household loans. This is because it will be difficult to avoid public criticism if only deposit and savings interest rates are lowered.
However, as local banks began to take the lead in lowering deposit interest rates, it became more likely that commercial banks’ deposit and savings interest rates would follow suit. This is because if commercial banks do not lower interest rates, funds leaving local banks may flow to commercial banks with relatively high interest rates. An executive in charge of funds at a commercial bank explained, “It is difficult to maintain the interest rate on term deposits high because we cannot provide loans even if the number of deposits increases to manage household loans.”
Due to the reduction in deposit interest rates, the difference between deposit and loan interest rates between Busan Bank and Kyongnam Bank is expected to widen. This is because while the two banks lowered their deposit interest rates, they raised their main mortgage interest rates. The lowest interest rate for ‘ONE Home Mortgage Loan’, Busan Bank’s representative home loan product, was 4.3% per annum as of this day, up 0.54 percentage points compared to the 8th (3.76% per annum) two weeks ago. Gyeongnam Bank’s ‘BNK Mobile Home Mortgage Loan’ minimum interest rate also increased from 3.99% per year to 4.17% per year during the same period.
It is expected that the fact that financial authorities are wary of the widening deposit-loan interest rate gap will act as a burden for commercial banks to reduce deposit interest rates.
Lee Bok-hyeon, head of the Financial Supervisory Service, held a financial situation review meeting on the 11th and asked, “Please closely monitor the trend of deposit and loan interest rates so that the effect of the base interest rate cut is reflected.”
Reporter Jeong Eui-jin justjin@hankyung.com
