Financial regulators have postponed instructing banks to slash service fees on transactions via automated teller machines due to complaints from the banking sector, sources said.
The Financial Supervisory Service had planned to announce the policy to force banks to cut service fees on money transfers and withdrawals from ATMs last Tuesday.
“We had no choice but to omit it from the (package of) measures as several banks expressed uneasiness before our announcement,” a high-ranking FSS official said.
As for the consumer protection measures, he said the FSS should seek consent from all banks.
“The Korea Institute of Finance has been analyzing costs for money transfer services,” he said. “We’ve decided to wait until the result comes.”
The banking services include remittances, internet banking and the use of ATMs. Commercial banks have faced criticism for providing what critics call hefty dividends to shareholders while being stingy in cutting service fees.
Over the past few years, regulators continued to urge banks to find ways of benefiting customers, such as cutting commission fees.
Many banks argue that service fees in the local market are not high compared to those of developed countries.
“Korean banks’ service charges are lower than those in major countries, including the United States,” a local banker said.
He also said service fees are being discounted through a variety of preferential treatment policies.
According to the Bank of Korea, banking service fees have jumped more than 30 percent over the past few years.
Central bank data also shows that banking service charges rose more than 25 times faster than the consumer inflation rate.
Despite the reversal on other fees, the FSS on Tuesday said that it would instruct banks to slash additional interest rates on overdue household loans.
The regulator has decided to lower the interest rates on overdue lending, which range from 14-21 percent.
The measure is aimed at making banks lower the rates by 1 percentage point on average.
If banks slashed the rate by 1 percentage point, Korean consumers would see their interest burden reduced by 100 billion won ($92.5 million) per annum, officials said.
The FSS has also decided to seek the elimination of interest on deposit-collateralized overdue loans in the commercial banking sector.
On Thursday, the FSS unveiled measures to ease the burden of consumers in the insurance sector, which involves offering low-priced automobile insurance products.
Regulatory measures to protect retail stock investors are expected to come in mid-September.
By Kim Yon-se (
kys@heraldcorp.com)
