Financial Sector Conscious of 'Donjanchi' Criticism... Major Banks' Loan Interest Rates Approaching 4% Range

Kakao Lowers by up to 0.70%p
KB to Reduce by up to 0.55%p Starting from the 28th

[Asia Economy Reporter Yu Je-hoon] Following the announcement of large-scale hiring expansion plans, the banking sector has begun lowering loan interest rates. This comes just a week after unveiling a social contribution plan worth '10 trillion won + alpha.' It is interpreted as a response to pressure from financial authorities to present measures that consumers can actually feel, rather than just social contribution plans.

According to the financial sector on the 21st, from today, the mortgage and credit loan interest rates of major commercial banks are expected to drop to the low 4% range. After President Yoon Seok-yeol's 'money feast' remark and the financial authorities' warning on performance bonuses, banks are voluntarily lowering loan interest rates by reducing additional interest rates and increasing preferential rates.

KB Kookmin Bank has decided to lower mortgage and jeonse (key money deposit) loan interest rates by up to 0.55 percentage points starting from the 28th. The KB mortgage loan interest rate (based on new balance CoFIX) will decrease by up to 0.35 percentage points, and the interest rates for KB mortgage jeonse loans, KB Jeonse Security Loans, and KB Plus Jeonse Loans will drop by up to 0.55 percentage points. As of today, KB Kookmin Bank's mortgage loan and jeonse loan interest rates stand in the high 4% range (mortgage loans based on new balance CoFIX 4.96~6.36%, jeonse loans 4.63~6.03%). Reflecting the decline from next week, rates will fall to the low to mid 4% range.

KakaoBank also lowered credit loan and overdraft interest rates by up to 0.70 percentage points starting today. Accordingly, the minimum interest rate for credit loans dropped to 4.286%, and overdraft loans to 4.547%. Additionally, KakaoBank raised the maximum limits for credit loans and overdraft loans from the previous 250 million won and 200 million won to 300 million won and 240 million won, respectively.

While KB Kookmin Bank and KakaoBank reduced additional interest rates, Woori Bank lowered the effective interest rates felt by customers by increasing preferential rates. Additional interest rates are those arbitrarily added by banks considering various costs and margins at the time of lending, while preferential rates are discounts given based on consumers' transaction performance and conditions. Starting from the 21st, Woori Bank increased preferential rates on mortgage loans based on the new balance CoFIX 6-month variable rate by 0.45 percentage points and on the 5-year variable rate by 0.20 percentage points. As a result, the 6-month variable rate based on new balance CoFIX fell from 5.91~6.71% to 5.46~6.26%, and the 5-year variable rate dropped from 5.24~6.24% to 5.04~6.24%.

In addition, Shinhan Bank and NH Nonghyup Bank are reportedly reviewing adjustments to their loan interest rates.

The banking sector's belated move to adjust loan interest rates follows repeated criticism that the previously announced social contribution plan worth 10 trillion won + alpha is 'all show and no substance' (외화내빈, 外華內貧). Looking at the detailed support contents, most of the 10 trillion won is filled by the so-called 'guarantee multiplier' effect, which allows loans up to 15 times the guarantee fund, while the additional costs borne by banks themselves remain at about 280 billion won over three years. Critics argue that this does not provide significant help to households and businesses struggling with soaring loan interest rates.

Lee Bok-hyun, Governor of the Financial Supervisory Service, also demanded a more 'substantial' return from the banking sector in a clearer tone. On the 17th, he told reporters, “What matters is not the golden calf three years from now, but the immediate need for a sip of water in our hands,” adding, “It slightly misses the essence of the problem.” This was interpreted as a call for banks to take measures such as lowering interest rates that financial consumers can actually feel.

Meanwhile, until last year, the banking sector had been reducing branches and workforce, but recently promised large-scale hiring expansion. This is a follow-up measure after the financial authorities urged the financial sector to expand hiring at a youth employment meeting held the day before.

Accordingly, the banking sector plans to hire 2,288 new employees in the first half of this year, a 48% increase compared to the previous year. Other sectors such as financial investment (1,035 people), non-life insurance (513 people), life insurance (453 people), specialized credit finance (279 people), and savings banks (151 people) have also announced new hiring plans one after another.

The move to expand hiring is interpreted as a response to criticism that the financial sector, while profiting from interest rate hikes and the non-face-to-face nature of financial transactions, has been stingy in hiring new personnel. Kim So-young, Vice Chairperson of the Financial Services Commission, mentioned at the youth employment meeting that the financial sector should view the expansion of internal control and IT specialists and ensuring access to financial channels not as costs but as investments.