Savings accounts with 10% interest appear... Fixed deposits remain around 4%
FSS warns "Excessive competition risks secondary financial institutions"
Signs of overheated competition are emerging in the banking sector, with savings products offering annual interest rates reaching as high as 13%. Amid concerns about potential side effects, financial authorities have stepped in with repeated warning messages to contain the situation.
On the 25th, the Financial Supervisory Service (FSS) convened a 'Banking Sector Fundraising and Management Meeting' with deputy heads from 10 major commercial banks nationwide, where these concerns were raised.
According to multiple media reports, the FSS reportedly urged at the meeting to "refrain from excessive deposit competition that exceeds the rise in market interest rates." They also emphasized that "to avoid burdening the bond market due to eased regulations on bank bond issuance, interest rate competition should also be restrained."
As of the 29th, according to financial sources, Jeonbuk Bank's special promotional product 'JB Super Seed Savings,' sold from the 5th of this month until the end of March next year, offers a basic annual interest rate of 3.60% and a maximum of 13.60%. Similarly, Gwangju Bank's 'Gwangju Bank Partnership Savings with Uplus.com' provides a basic rate of 3.00% and a maximum rate of 13% annually.
Woori Bank's 'Daily Walking Savings' offers up to 11% annual interest, and 'Woori Boss Blooming Savings' up to 10%. KB Kookmin Bank's 'On 국민 Health Savings - Golden Life' also offers a maximum annual interest rate of 10%, with interest exceeding 10% annually.
However, bank officials explain that "most of these savings products targeting new customers are designed as bait products to attract clients." Since some come with difficult-to-meet conditions, financial consumers need to carefully discern high-quality products. For example, to receive the maximum 11% annual interest benefit from Woori Bank's 'Daily Walking Savings,' one must walk more than 10,000 steps daily according to the bank's pedometer standard on deposit days.
For fixed deposits, which rarely have such complicated conditions, products offering over 4% annual interest have already become mainstream. IBK Industrial Bank's 'IBK D-Day Account' is a fixed deposit with both basic and maximum interest rates at 4.35% annually. Depositing up to 200 million KRW can yield 7.36 million KRW in interest after tax in one year. SC First Bank's 'e-Green Save Deposit' offers up to 4.35% interest for deposits up to 1 billion KRW.
Many of these high-interest products are not registered on consumer portals such as the Bankers Association's consumer portal. Nevertheless, they are reportedly gaining high popularity through word of mouth among well-informed consumers.
However, if banks' deposit competition overheats, funding costs may rise, causing loan interest rates to increase accordingly. Additionally, it could drain market liquidity, making it difficult for secondary financial institutions to secure funds.
Previously, financial authorities decided to abolish the bank bond issuance limit, which restricted issuance to no more than 125% of the monthly maturing volume, starting from the fourth quarter. This is seen as part of measures to prevent overheated deposit competition among banks.
An FSS official stated, "If banks spiral into overheated high-interest deposit competition, the entire secondary financial sector could be at risk," adding, "We are carefully managing high-interest deposit maturities until next month and continuously monitoring deposit interest rates."
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