Strong and Weak Banks Narrow Interest Rate Gap

Home > Business > Finance

print dictionary print

Strong and Weak Banks Narrow Interest Rate Gap

The customary gap in deposit rates offered by healthy and ailing banks is disappearing, possibly because of the increased ceiling on deposit guarantees.

H&CB and Kookmin Bank, two of the nation's healthiest banks, now offer the highest interest rates in the banking industry for time deposits with one year maturities, at 6.4 percent. Cash-strapped banks such as Chohung Bank, Korea Exchange Bank and Hanvit Bank, each of which has been told to submit management improvement plans to financial authorities, all offer lower rates. Chohung's annual rates stand at 6 percent while the rates of the two other banks are 6.1 percent.

This is a sharp reversal from deposit rates paid last November, when the troubled banks were forced to jack up deposit rates to attract customers. Weak banks like Seoul Bank and the Peace Bank of Korea had deposit rates then of 7.5 to 7.7 percent, higher than the 7 percent offered by the nation's five strongest lenders, including KorAm Bank, Hana Bank and Shinhan Bank.

Market experts cited the increased ceiling on deposit guarantees, which was lifted from 20 million won ($16,077) to 50 million won, as the main cause of the vanished gap. They also said that many banks are stronger after getting restructuring funds.



by Cheong Chul-gun

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)