[Asia Economy Reporter Buaeri] Although the Bank of Korea raised the base interest rate by 0.25 percentage points this month, 5% deposit products are disappearing again from commercial banks. This is interpreted as the result of financial authorities urging restraint in deposit interest rate competition.
According to the Bankers Association disclosure on the 29th (as of the previous day), Woori Bank's representative deposit product, 'Woori WON Plus Deposit,' offers a maximum annual interest rate of 4.98% for a 1-year term. This product was the first to open the 5% deposit era by offering a 5.18% interest rate for a 1-year term on the 13th. Just ten days ago, it offered a 5.05% interest rate but has now returned to the 4% range. The 'Woori WON Plus Deposit' applies daily interest rates based on market rates.
The situation is similar for other major commercial banks that once offered interest rates exceeding 5%. KB Kookmin Bank's 'KB Star Time Deposit' offers a maximum annual interest rate of 4.7% for a 12-month term. This product also exceeded 5% with a 5.01% rate on the 19th. Shinhan Bank's 'Sol Convenient Time Deposit' offers up to 4.95% annually. However, among the four major commercial banks, only Hana Bank's 'Hana Time Deposit' still maintains a maximum annual interest rate of 5%.
The disappearance of 5% products from major commercial banks is closely related to the authorities' repeated messages to restrain deposit interest rate hikes. Earlier, on the 25th, Financial Services Commission Chairman Kim Joo-hyun said, "Excessive competition for fund acquisition in the financial sector can act as a destabilizing factor in the financial market, so it is necessary to refrain from excessive competition both between and within sectors." Interest rate hikes by commercial banks put pressure on the secondary financial sector, which raises funds through deposits. The rise in loan interest rates is also problematic. When deposit and savings interest rates rise, COFIX (Cost of Funds Index) increases. Since COFIX serves as the benchmark for variable loan interest rates such as mortgage loans and jeonse (key money) loans, it also affects loan interest rates.
However, some banks that have relatively less influence on the market compared to major commercial banks still maintain 5% deposit rates. For example, the Sh Plus Alpha Deposit (2nd) offers a maximum annual interest rate of 5.3%. Suhyup Bank proactively raised the base interest rate of this product by 0.5 percentage points on the 21st, before the Bank of Korea's rate hike. BNK Busan Bank's 'The Special Time Deposit' offers up to 5.4% annually. Jeonbuk Bank's 'JB 123 Time Deposit (Maturity Payment Type)' offers up to 5.3%, and Jeju Bank's J Time Deposit (Maturity Payment Type) also offers up to 5%. Gwangju Bank's 'Horatchacha Digital Deposit' is also around 5%. However, preferential interest rate conditions need to be checked.
As the four major commercial banks raised deposit interest rates, internet-only banks have regained their competitiveness in interest rates that had fallen. K Bank raised the interest rate of its 'Code K Time Deposit' product by up to 0.5 percentage points starting from the 28th. Accordingly, it offers a maximum annual interest rate of 5% for a 12-month term.
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