[2020 National Audit] "IBK, Excessive Interest Charges Targeting Small and Medium Enterprises"

Assemblyman Kim Byung-wook: "IBK, a policy bank, has the highest corporate loan-deposit interest rate spread"

[Asia Economy Reporter Park Sun-mi] It has been pointed out that Industrial Bank of Korea (IBK) has the highest interest rate spread between deposits and loans among commercial banks, excessively charging interest to small and medium-sized enterprises (SMEs).

On the 16th, according to the data on the "Interest Rate Spread between Deposits and Loans for Corporations of the Four Major Commercial Banks and Industrial and IBK" submitted by the Financial Supervisory Service to Kim Byung-wook, the Democratic Party member and secretary of the Political Affairs Committee, IBK had the highest corporate interest rate spread among commercial banks in the first half of this year.

The corporate interest rate spread refers to the difference between the average interest rate a bank charges when lending to corporations and the average interest rate it pays when corporations subscribe to deposit products. Generally, the interest rate spread widens when competition in the deposit and loan markets is low, banks have a strong risk-averse tendency, or credit risk is high.

As of the first half of this year, looking at the corporate interest rate spreads of the four major commercial banks and the policy banks, IBK had the highest at 2.14 percentage points (p), followed by Kookmin Bank at 1.72%p, Shinhan Bank at 1.65%p, Hana Bank at 1.57%p, Woori Bank at 1.51%p, and Korea Development Bank at 1.11%p. Except for IBK, all banks had corporate interest rate spreads in the 1%p range. Moreover, IBK has had the highest corporate interest rate spread compared to commercial banks for four consecutive years since 2017.

The average interest rate received by each bank for unsecured loans to SMEs was also the highest at IBK for five consecutive years. IBK provides most of its corporate loans (about 96%) to SMEs, but over 60% of these are secured loans, and the proportion of unsecured loans is gradually decreasing, raising concerns that the bank is neglecting the difficulties of SMEs.

Rep. Kim stated, "Of course, as a policy bank, there may be cases where IBK lends to SMEs that commercial banks find difficult to handle due to risk, but the absolute high ratio of secured loans and the fact that Korea Development Bank, another policy bank, has the lowest interest rate spread suggest that IBK could be criticized for excessively charging interest to struggling companies."

He added, "While IBK is increasing support for SMEs in line with its founding purpose, it needs to reflect on whether companies that truly need loans are being marginalized and whether the loans themselves are becoming a burden for SMEs."