Financial Authorities: "Disclosure of Loan-Deposit Interest Rate Spread Aims to Enhance Comparability Among Banks and Protect Consumer Rights"

[Asia Economy Reporter Song Hwajeong] Financial authorities explained that the purpose of disclosing the interest rate spread between deposits and loans is to enhance comparability among banks regarding overall interest rate levels and to improve consumer rights.

On the 25th, the Financial Services Commission and the Financial Supervisory Service released a document titled "Detailed Explanation on the Disclosure of Interest Rate Information including the Deposit-Loan Interest Rate Spread," stating this.

Following the start of banks' disclosure of the deposit-loan interest rate spread on the 22nd and the emergence of various controversies, financial authorities actively provided explanations.

There have been concerns that excluding demand deposits when calculating the interest rate spread may cause an optical illusion effect. In response, the FSC explained, "This improvement in interest rate information disclosure aims to address criticisms that bank deposit interest rates do not properly reflect market interest rate fluctuations. Therefore, the calculation of the deposit-loan interest rate spread targets savings-type deposit products affected by market interest rate changes, excluding non-savings products such as demand deposits." They added, "From the consumer's perspective, comparing savings and loan interest rates, which are closely related to asset management, is more meaningful, which is a common opinion among related institutions." The Bank of Korea also explained that non-savings products such as demand deposits are excluded when calculating the deposit-loan interest rate spread monthly.

Regarding the fact that banks with a high proportion of medium- and low-credit loans and loans for low-income households show particularly large interest rate spreads, the FSC stated, "Banks actively handling medium- and low-credit loans may show relatively larger average interest rate spreads. Recognizing this issue, we have required the disclosure of loan interest rates and interest rate spreads by credit score segments that are not affected by the proportion of medium- and low-credit loans, and the average credit score is also disclosed."

In response to criticism that the effect is limited because the comparative disclosure of the deposit-loan interest rate spread is only implemented for first-tier banks, the FSC said, "Since the comparative disclosure of the deposit-loan interest rate spread is being implemented, it was first applied to banks with a large number of users and high social interest. Whether to expand it to other sectors will be reviewed comprehensively considering the impact of the comparative disclosure and the characteristics of each sector."

There are also concerns that consumers who choose a bank based on the disclosed average loan interest rate may end up with a higher interest rate than other banks. The FSC responded, "The interest rates disclosed through the Korea Federation of Banks are based on average rates, so there may be differences from the rates actually applied to individual consumers. The purpose of disclosing average rates is to enhance comparability among banks regarding overall interest rate levels and to allow banks to explain any differences if necessary, thereby improving consumer rights." They added, "When individual consumers actually take out loans, it is necessary to compare and confirm the rates actually applied to them through various channels such as banks and loan brokers (online and offline)."

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