Banks Reap W15 Trillion Windfall by Hiking Loan Interest

      August 05, 2021 11:25

      Bank loan interest rates rose 0.25 percentage points over the past year while the deposit interest they paid declined 0.11 percentage points even though the key interest rate remained flat.

      That meant the top five lenders -- KB Kookmin, Shinhan, KEB Hana, Woori and NH Nonghyup banks -- earned a record W15.5 trillion in interest profit alone in first half of this year (US$1=W1,145).

      According to the Bank of Korea on Wednesday, the average household loan interest rate of 19 commercial banks in Korea was 2.92 percent in June, up 0.25 percentage points on-year. But the deposit interest rate on three to four-year installment savings products fell from 1.23 percent to 1.12 percent over the period.

      The BOK slashed the base rate by 0.75 percentage points in two adjustments last year, causing deposit interest rates to fall, while people borrowed heavily to buy homes and stocks. Banks apparently raised interest rates under pressure from the government, which wanted to quell borrowing.

      Kim So-young at Seoul National University said, "Banks were told to regulate their total loan amounts and raised borrowing rates, so debtors have ended up with a higher interest burden." 

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