Foreign banks raising loan commission broker fees

Foreign banks operating in Korea have raised their commission fees for loans in the face of the local financial authorities’ move to lessen burdens for borrowers, data showed yesterday.

The commission fee for loans extended by Standard Chartered Bank Korea stood at 2.42 percent in the fourth quarter of last year, up 0.13 percentage point from 2.29 percent three months earlier, according to the industry data.

The corresponding figure for Citibank Korea rose 0.05 percentage point to 1.77 percent over the cited period, the data showed.

A loan commission fee refers to an incentive a bank pays a broker, and a higher fee can entail an increase in lending rates since the bank needs to recoup the costs.

The higher fees are in contrast to fees set by domestic banks.

The commission fee at five major lenders, including Kookmin Bank and Woori Bank, came in at 0.79 percent, down 0.05 percentage point from 0.84 percent in the same period.

Financial authorities have stepped up efforts to cap the upper limit of the commission fees by amending the related law, as part of a broader move to stabilize mounting household debt, which reached a record 959.4 trillion won as of the end of December.

There is speculation that by the end of this year household debt would reach 1,000 trillion won.

Officials at the two foreign banks explained that the hikes in commission fees were necessary because they had to hire outside brokers since the banks have fewer branches than local banks. Yonhap