Woori Bank has decided to offer a preferential interest rate of 0.3 percentage points to customers with a credit rating of 1, who are taking out credit loans. This is to attract high-credit customers with low arrears rates, raising concerns that low to moderate credit customers may be pushed down the loan priority list and bear higher interest rates.
According to the financial sector on the 23rd, Woori Bank established a new preferential interest rate category for credit loans on the 21st. The main point is to offer a preferential interest rate of 0.3 percentage points when meeting the credit evaluation (CB) grade 1. The credit score range for customers classified as CB grade 1 by Woori Bank is 966 to 1000 points according to Korea Credit Bureau (KCB) and 946 to 1000 points according to NICE Information Service. Additionally, they decided to provide a preferential interest rate of 0.1 percentage points based on check card usage and partitioning of loan repayments.
The loan interest rate is determined by adding the base rate to the additional charge and then subtracting the preferential interest rate; as the preferential interest rate increases, the loan interest rate decreases, leading to a reduction in interest. For instance, if consumer A borrows 100 million won for 5 years under a principal and interest partitioning repayment condition at an annual rate of 4%, they will have to pay 10.5 million won in interest. However, consumer B, who receives a 0.3 percentage point preferential interest rate, will have their loan interest rate reduced to 3.6% and will pay 9.42 million won in interest, which is about 1 million won less.
In the banking sector, it's said that providing preferential interest rates based on customer credit ratings is unusual. The preferential interest rates are determined at the bank's discretion and are typically offered based on 'transaction performance' such as payroll transfers, marketing consent, automatic transfers, card performance, initial transactions, and dwellings subscription. A source from a major commercial bank noted, "In my 20 years in banking, I've never seen preferential interest rates granted based on customer credit ratings before," adding, "It seems mainly aimed at maintaining soundness."
A source from Woori Bank explained, "This aims to diversify the options for interest rate preferences and maintain soundness." Woori Bank is in urgent need of soundness management. The Financial Services Commission has conditionally approved Woori Financial Group's acquisition of Tongyang and ABL Life Insurance, but Woori Financial must raise its common equity tier 1 (CET1) capital ratio to over 13% by 2027. To do this, the risk-weighted assets (RWA) that serve as the denominator in CET1 calculation must be reduced. RWA is assessed to be lower for loans with a lower credit risk.
The problem is that if banks focus on conducting business primarily with low-risk, high-credit customers, low to moderate credit individuals and those from low-income groups will inevitably find themselves facing a lending cliff. A source from the financial sector commented, "As the bar for bank loans rises, even high-credit customers are increasingly moving to secondary financial institutions," adding, "If this continues, there's a significant possibility that genuine loan seekers will be pushed out of the regulated sector."