Savings Banks Exploit Interest Rates on Low-Income Borrowers... Loan-Deposit Rate Gap Four Times Larger Than Commercial Banks

Assemblyman Kang Min-guk Discloses Savings Bank Interest Income... "Need for Interest Rate Review and Competition Encouragement" Highlighted

A bank in downtown Seoul on the 1st, where financial authorities are implementing high-intensity loan regulations. / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Song Seung-seop] It has been identified that the savings bank industry is earning enormous interest profits with a loan-deposit interest rate spread four times that of commercial banks.

According to data submitted by the Financial Supervisory Service to Kang Min-guk, a member of the National Assembly's Political Affairs Committee from the People Power Party, the savings bank sector's net interest margin income last year was recorded at 5.031 trillion KRW. This is a 20.3% increase compared to two years ago, and over three years, the total net interest margin income earned by the savings bank sector reached 13.695 trillion KRW.

The average loan-deposit interest rate spread of each savings bank was 7.2 percentage points. Last year it was 7.6 percentage points, and in 2018-2019 it was 7.9 percentage points respectively. This spread is about four times larger than that of commercial banks, where the spread is formed around 1.9 percentage points.

The increase in net interest margin income was more pronounced among the top major savings banks with large asset sizes. The net interest margin income of the industry's first and second ranked banks, SBI Savings Bank and OK Savings Bank, recorded 629.4 billion KRW and 830.1 billion KRW respectively last year. They grew by 62.2% and 38.8% over two years. During this period, Pepper Savings Bank and Korea Investment Savings Bank also saw their net interest margin income increase by more than 50%.

As of July, the loan-deposit interest rate spread of major savings banks exceeded 9%. SBI Savings Bank had 9.4 percentage points, OK Savings Bank 11.3 percentage points, Welcome Savings Bank 10.3 percentage points, Pepper Savings Bank 9.6 percentage points, and Korea Investment Savings Bank 6.1 percentage points.

Assemblyman Kang stated, “The Financial Supervisory Service should investigate the interest rate operation practices of savings banks, and if there are issues with the calculation basis, strict measures should be taken.” He added, “It is necessary to regularly disclose the interest rate operation status of savings banks to promote competition in lowering interest rates.”

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