South Korean banks and credit card firms might face difficulty in raising their fees, as the financial authorities began reviewing President Moon Jae-in’s pledges to adopt a new regulation to toughen rules on financial fees, industry sources said Monday.
Moon, who believes in big government and its larger role in the market, had vowed to “adopt a system to evaluate the legitimacy of financial fees,” according to the booklet of his election pledges.
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The Financial Services Commission is reviewing to what degree the financial regulator can intervene, and in which sectors a new regulation would apply, an FSC official said.
“Because we are at the very first stage of the review, I cannot comment further,” the official said.
In the banking industry, there had been some moves to raise fees for maintaining accounts, using teller services at brick-and-mortar branches or opening up new accounts. Citibank Korea decided in March to charge fees for maintaining bank accounts. Kookmin Bank, the nation’s second-largest retail lender, has been reviewing raising fees for teller services “in various ways,” the bank’s spokesperson said.
Bank fees in Korea are relatively low compared to those in other nations. A report by the Korea Institute of Finance revealed that Korean bank fees for sending money were between 500 won ($0.45) and 3,000 won as of the end of December, much lower than $35 in the US, 25 pounds ($32.5) in the UK and 648 yen ($5.8) to 864 yen in Japan.
Moon also promised to lower credit card fees charged on mom-and-pop stores that use credit card services in order to ease the financial burden of small merchants.
He said he would seek to lower credit card commission rates imposed on small and medium-sized stores from the current 1.3 percent to 1 percent, and apply the rates to broader businesses including convenience stores, pharmacies and bakeries.
An industry official said his pledge is a big burden on the credit card industry.
“For the past several years, the commission rates on small merchants have been continuously lowered. Moreover, lowering such fees does not actually help small vendors because it would reduce fees by only 10,000-20,000 won per month. For a credit card company, lowering the rate will make losses in billions of won,” the official said on condition of anonymity.
Moon also vowed to gradually cut the maximum legal lending rate from the current 27.9 percent to 20 percent in order to help ease the loan repayment burden on vulnerable households. As a first step, he promised to lower it to 25 percent within this year.
By Kim Yoon-mi (
yoonmi@heraldcorp.com)
