[Base Interest Rate 1% Era] Woori and Hana Bank Raise Savings Deposit Rates by 0.4%p... Other Banks Also "To Raise Soon"

Base Interest Rate Raised by Additional 0.25% Points
Deposits and Savings See 'Larger Increase' Up to 0.40% Points

[Asia Economy Reporter Park Sun-mi] Reflecting an additional 0.25 percentage point increase in the base interest rate, Woori Bank and Hana Bank will raise their savings and deposit interest rates by up to 0.40 percentage points. Other major banks such as KB Kookmin, Shinhan, and NH Nonghyup are also expected to join the rate hike trend soon.

According to the banking sector on the 25th, Hana Bank will raise interest rates on five installment savings products, including the main transaction Hana monthly compound interest savings, by 0.25 to 0.40 percentage points starting from the 26th. Additionally, from the 29th, interest rates on seven installment savings products such as Challenge 365 Savings and six fixed deposit products including 369 Fixed Deposits will also be increased by 0.25 percentage points.

Woori Bank will also raise savings and deposit interest rates by up to 0.40 percentage points starting on the 26th. Interest rates for 19 fixed deposit products and 28 savings products will all increase. Most of the savings and deposit products currently on sale will see interest rate hikes of 0.20 to 0.40 percentage points, while demand deposit products will increase by 0.10 to 0.15 percentage points.

Other banks are also preparing to raise savings and deposit interest rates. KB Kookmin Bank, Shinhan Bank, and Nonghyup Bank are finalizing adjustments on the extent of the increase, aiming to raise rates further by reflecting the base rate hike.

The gap between deposit and loan interest rates (the deposit-loan rate spread) has widened to an average of 2.1 percentage points, marking the largest disparity since 2010. Within the banking sector, there is a consensus that interest rates should be raised more than the recent base rate hike. A representative from a commercial bank stated, "We recognize consumers' complaints that loan interest rates are too high while deposit interest rates remain low," adding, "There is a strong possibility that the increase in deposit interest rates will be larger than the one applied during the August base rate hike."

In fact, before the base rate hike on this day, the fixed deposit interest rates of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?were approximately 0.5 to 1.79 percent annually, even after factoring in various preferential rates. This averages about 1.37 percent annually, showing a significant gap compared to credit loan interest rates ranging from 3.6 to 4.2 percent annually.

The financial authorities' close monitoring of the widening deposit-loan interest rate gap is also expected to influence the banking sector's decision on the extent of deposit interest rate hikes. On the 23rd, Financial Supervisory Service (FSS) Governor Jeong Eun-bo told reporters that while they will not intervene in the banks' decisions on deposit and loan product interest rates, they are closely watching the widening gap and investigating its causes.

The FSS has previously convened deputy heads of banks to review the interest rate calculation system. The FSS pointed out that banks excessively emphasize the highest interest rates when selling savings and deposit products, but the actual rates received fall short. The day before, the FSS issued a consumer alert 'Caution' regarding the sale of savings and deposit products offering preferential interest rates.

When banks sell special savings and deposit products, they advertise high rates by listing the highest interest rate in the key explanation document. However, the interest paid to matured customers averages only 78% of the highest rate (based on 21 matured products). This is attributed to banks requiring complex and difficult-to-achieve conditions for preferential interest rates, such as registering for open banking, meeting usage performance of affiliated products, and pension transfer achievements, to apply the highest interest rate (base rate plus preferential rate).