Expansion of Bank Loan-Deposit Interest Rate Spread Disclosure... Comparison of Jeonse Loan Interest Rates Too

'Bank Profitability' Loan-to-Deposit Interest Rate Spread Based on Balance Also Disclosed

To promote competition in the banking sector, the disclosure system for the interest rate spread between deposits and loans will be expanded starting in the second half of this year. The authorities plan to additionally require comparative disclosure of the balance-based interest rate spread, which reflects banks' profitability, include jeonse loan interest rates in the disclosure scope, and further segment the disclosure of household loan interest rates.

The Financial Services Commission announced on the 3rd that this decision was made based on the report and discussions of the '1st Banking Sector Management, Business Practices, and System Improvement Task Force (TF) Working Group.' The Financial Services Commission aims to implement the expanded disclosure system for the interest rate spread in July and plans to revise the supervisory regulations for banking operations and establish a computerized system between the Korea Federation of Banks and individual banks.

Following the improvement plan for the interest rate information disclosure system announced in July last year, banks have been disclosing comparative information on the interest rate spread based on new transaction amounts and detailed interest rate information by bank. As a result, the interest rate spread based on new transaction amounts has narrowed from 1.80 percentage points in January last year to 1.63 percentage points in January this year, and the household interest rate spread has decreased from 2.26% to 1.64%.

However, despite these strengthened disclosures, the authorities judge that competition among banks remains insufficient, as banks continue to record record-high profits through interest margins. In particular, the balance-based interest rate spread, which indicates overall profitability, increased from 2.24% to 2.58% during the same period. Additionally, some interest rate information necessary for consumers, such as jeonse loan interest rates, is not currently disclosed.

Accordingly, starting in July, the authorities will require banks to additionally disclose the balance-based interest rate spread, which reveals banks' profitability. Detailed interest rate information, including loan interest rates (household and corporate) and deposit interest rates, will also be disclosed based on balances.

Furthermore, in addition to the currently disclosed mortgage loans, unsecured loans, and overdraft loans, jeonse loans will be added as a comparative disclosure item. This is in response to criticism that, despite being closely related to citizens' daily lives, detailed interest rates by bank are not disclosed, limiting competition promotion and the protection of financial consumers' choice rights.

The authorities will also segment the disclosure of household loan interest rates into base rates, additional rates, and preferential rates for comparative purposes. While interest rates are currently segmented and disclosed by loan product, such as mortgage or unsecured loans, the overall household loan interest rate is not segmented, making it difficult to verify and compare the characteristics of interest rate calculations by bank.

Additionally, the authorities plan to establish an 'explanation page' where banks can voluntarily explain factors affecting interest rate changes, thereby promoting communication between banks and financial consumers. A financial regulatory official stated, "To promote competition in the banking sector and improve consumer access to information, we will expand the disclosure of banking interest rate information, including the balance-based interest rate spread." He added, "We will proceed with revising related supervisory regulations and building the computerized system, aiming for implementation in the first half of the year."