Lee Bok-hyun, the Governor of the Financial Supervisory Service (FSS), expressed concerns over the widening gap between deposit and loan interest rates among banks, despite recent base rate cuts. He remarked, “It is worrisome to see the spread between deposit and loan interest rates expanding at a time when economic entities should be experiencing relief from interest burdens due to the base rate cut.”
During an executive meeting held on the 5th at the FSS headquarters in Yeouido, Seoul, Governor Lee stated, “It’s not desirable for the relief of interest burden, which should come from the base rate cut, to be diluted due to the widening spread between deposit and loan interest rates.”
According to the FSS, the gap between new loan and deposit interest rates in domestic banks, which recorded 1.26% in March this year, showed a declining trend, reaching 1.13 percentage points in August. However, it expanded again to 1.22 percentage points in September.
Governor Lee also noted, “Typically, the base rate cut is initially reflected in deposit rates and then with a time lag in loan rates.” He instructed, “Analyze the liquidity conditions and trends in deposit and loan rates at each individual bank, and closely inspect the path of rate reflection.”
He further urged, “In a situation where volatility in domestic and international financial markets is high, there may be an increased demand for deposits and bank bond issuance. Please manage carefully to ensure that the effects of the base rate cut are not delayed due to these factors.”