It was found that the amount that the top 10 savings banks reflected in loan interest to cover legally mandated expenses such as insurance premiums, education tax, and contributions reached 1 trillion won over about five years.
According to data submitted by Rep. Heo Young of the National Policy Committee on the 12th from the Financial Supervisory Service, the top 10 domestic savings banks by credit exposure (SBI, OK, Korea Investment, Accuon, Welcome, Daol, Shinhan, Hana, Pepper, KB) reflected a total of 963.1 billion won in statutory costs in loan interest over the five years and six months from 2020 through the first half of this year.
Of that, deposit insurance premiums accounted for 731.3 billion won, or 75.9% of the total, with 94.8 billion won for reserve requirements, 93.8 billion won for education tax, and 43.2 billion won in contributions for the Sunshine Loan program.
Statutory costs are expenses that financial companies are required to bear by law, including education tax, the expense of reserve requirements, insurance premiums under the Depositor Protection Act, and various contributions.
Savings banks set interest rates by reflecting these statutory costs in the loan spread along with operating expenses, target profit margins, and adjustment rates. Some have criticized this as passing on costs that financial institutions should bear to consumers.
In response, commercial banks revised the best practice code for loan interest rates to prohibit reflecting depositor insurance premiums and reserve requirement expenses in the spread starting in 2023, but savings banks are still reflecting these items in the spread.
However, savings banks say their burden of deposit insurance premiums is greater than that of commercial banks. The current deposit insurance premium rate for savings banks is 0.4%, five times that of banks (0.08%). Since Sep. last year, the depositor protection limit was raised from 50 million won to 100 million won, raising the possibility that the deposit insurance premium rate will increase going forward.
Rep. Heo Young said, "Most savings bank customers are mid- to low-credit borrowers struggling with high interest rates, and it is unreasonable to pass on even the costs that financial institutions should bear to them," and added, "The best practice code for loan interest rates in the savings bank sector should be revised."