"Can't Withstand Negative Interest Rates" Japanese Banks Introduce Account Management Fees... What About Domestic Banks?

Japanese Banks' Operating Profit in 2018 About 3 Trillion Yen, Lowest in 20 Years
US Banks Charge Monthly Account Maintenance Fees of $6-$15
Possibility of Account Maintenance Fee Discussions in Korea as Zero Interest Rate Approaches

[Asia Economy Reporter Haeyoung Kwon] Japanese banks, struggling with deteriorating profitability due to ultra-low interest rates, are actively considering cost reduction through the introduction of account maintenance fees. In South Korea, Citibank Korea previously introduced account maintenance fees, but they became ineffective. However, if the current low-interest-rate trend continues, banks may discuss the introduction of account maintenance fees in the mid to long term.

According to the Korea Institute of Finance on the 4th, Japan's Kamagori Shinkin Bank introduced the "unused account maintenance fee" system in April last year. Account maintenance fees are a type of management cost that banks charge customers holding deposit accounts on a monthly basis. Banks incur costs for account management such as data management fees and passbook stamp taxes, and in Japan, as in South Korea, banks have borne these costs themselves.

Japanese banks are actively considering the introduction of account maintenance fees because the Bank of Japan (BOJ)'s ultra-low interest rate policy is worsening banks' profitability. Operating profits of 116 Japanese commercial banks for the 2018 fiscal year were about 3 trillion yen (approximately 32.411 trillion KRW), the lowest level in the past 20 years. The BOJ decided last month to maintain the policy rate (short-term interest rate) at -0.1% and the long-term interest rate at 0%.

Overseas, including the United States, large banks mainly charge customers account maintenance fees. According to a survey by Fujitsu Research Institute of 250 banks in the U.S., as of July last year, U.S. banks charged an average monthly account maintenance fee of $15 for interest-bearing accounts and $6 for non-interest-bearing accounts. The average deposit balance exempting fees is $7,123 or more for interest-bearing accounts and $622 or more for non-interest-bearing accounts.

The Korea Institute of Finance explained, "In Japan, to ease customer backlash, phased introduction plans for account maintenance fees have been proposed, such as prioritizing fees on corporate accounts before individual accounts," adding, "From the banks' perspective, introducing account maintenance fees will not only create revenue opportunities but also bring cost-saving effects." It further added, "The elimination of paper passbooks, which has long been a challenge due to costs such as passbook production and stamp taxes, can reduce these expenses."

In South Korea, Citibank introduced account maintenance fees in 2017, but fee income is almost nonexistent. However, if the low-interest-rate trend continues domestically and enters a zero-interest-rate era, banks may actively discuss the introduction of account maintenance fees in the mid to long term. Nevertheless, given the domestic financial consumers' sentiment that is reluctant to pay various fees and costs to banks, it seems difficult for such fee-charging policies to take root.

This content was produced with the assistance of AI translation services.