[Asia Economy Reporter Jin-ho Kim] Toss Bank, the third internet-only bank, has finally surrendered after failing to withstand negative interest margins. It has decided to partially change the unconditional 2% annual deposit interest rate it offered at its launch starting next year. The main reason is analyzed to be the expanding deficit due to the continued payment of deposit interest despite the inability to issue new loans.
According to the financial sector on the 3rd, Toss Bank announced that from the 5th of next month, it will apply an annual interest rate of 0.1% (before tax) on deposit amounts exceeding 100 million KRW.
The adjustment of Toss Bank's deposit interest rate is attributed to the significant increase in deficits caused by the suspension of loans while continuing to pay interest on deposits. Toss Bank, which launched last October, exhausted its loan limit of 500 billion KRW within about 10 days of its launch. The financial sector consensus is that deficits are greatly increasing as only deposit interest is being paid without new loans being issued.
The product offering an unconditional 2% annual interest rate had been controversial since its launch. There were doubts about how sustainable it would be to offer an interest rate up to 20 times higher than the usual 0.1~0.5% rates provided by commercial banks.
However, Toss Bank decided to maintain the 2% annual interest rate for deposits of 100 million KRW or less as before. A Toss Bank official stated, “Even during the interest rate hike period, the market competitiveness of the ‘Toss Bank Account,’ a demand deposit product unlike fixed deposits and savings, remains excellent,” and added, “We expect that about 99% of customers will continue to enjoy the same benefits as before.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
