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At a time when financial uncertainties are shaking markets across the globe, cash-strapped Korean banks are offering high interest rates, hoping to replenish cash deposits and patch holes in their balance sheets once filled by bonds.
Major banks are offering the highest interest rates on deposits seen since the 1997-1998 Asian financial crisis hit Korea, with the average now at 6.5 percent.
Korea's largest lender, Kookmin Bank, has introduced a one-year deposit offer with a maximum interest rate of 6.9 percent. Similar packages with even higher rates are being offered by other banks such as Shinhan, Woori and Hana.
The strategy aims to help banks striving to secure more U.S. dollars and get credit flowing again. It was sparked by competition from smaller lenders, like mutual savings banks, that focus mainly on consumer accounts, boosting their rates to nearly 8 percent. Their goal is to use the crisis as an opportunity to snatch customers away from bigger banks.
But analysts worry that heated competition could produce the negative effect of further raising interest rates on loans.
Arirang News
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