[Early Perspective] What Consumers Have Gained from Interest Rate Spread Disclosure

[Asia Economy, Reporter Sim Nayoung] These days, with even internet-only banks emerging, people often switch banks. However, just a few years ago, it was rare for anyone to change their main bank. The bank located on a university campus, the one that issued a "Love for Country" card during military service, or the bank where you deposited your first paycheck-once you settled with a bank by chance, it was common to stick with it for 10 or even 20 years. It was only when buying an apartment worth hundreds of millions of won after getting married that people would start to consider switching banks over a mere 0.1% difference in interest rates. For most, banks were just that: a fixture, not something to be reconsidered lightly.

The reason why most people have this kind of relationship with banks is the perception that "all banks are basically the same." Products, interest rates, branches-aside from the signboard, everything seemed identical, so there was no need to compare or switch. However, recently, an opportunity has arisen to break this fixed idea. Just as people compare prices when shopping online, the disclosure of the interest rate spread between loans and deposits, which displays both rates on a single screen, has proven that not all banks are the same.

Now, I can see whether the interest rate at Bank A, which I frequent, is higher or lower than those at Bank B and Bank C. In addition, I can read between the lines of the interest rates. Shinhan Bank, which had the largest interest rate spread, immediately explained after the disclosure, "This is because we supplied the largest amount of Sunshine Loans in the banking sector, offering loans to low-credit, vulnerable groups at an annual interest rate of 15.9%." Toss Bank, which had the largest spread among internet banks, added a note stating, "We have the highest proportion of mid- and low-credit borrowers among all banks." It is unprecedented for banks to proactively explain their internal circumstances without anyone asking.

There is a theory called the "lemon market," which uses the analogy of a beautiful-looking but sour lemon to explain the problem of information asymmetry between sellers and consumers in the used car market. Professor George Akerlof, who won the Nobel Prize in Economics, used this concept to argue that "when information is lacking, resources cannot be allocated efficiently, resulting in market failure." Since banks have long monopolized financial product information, the disclosure of the interest rate spread will significantly change people's financial lives. As people gain access to previously unknown information, they can now engage in "optimal search behavior," investing time and effort to make the most rational choices even when dealing with banks.

There is another benefit people have gained by leveraging information: banks have started to lower their interest rates. In an effort to avoid being ranked first in interest rate spreads, banks are now more competitively lowering their lending rates than ever before. These are measures taken by banks that achieved record profits during the interest rate hike period, as they wish to avoid public criticism. At the same time, these actions also help relieve the immediate burden of increased interest payments for ordinary people who are already struggling with concerns about an economic downturn.

The banks' complaints-that their average lending rates rose and the interest rate spread appeared larger due to factors such as "providing many loans to vulnerable groups," "higher demand for unsecured loans than for mortgage loans," and "promoting fixed-rate loans"-can be addressed by rationally improving the method of publishing interest rates. The mere fact that people now realize not all banks are the same means that the disclosure of interest rate spreads has served its purpose.

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