Banks to lower deposit rates

Cash-strapped local banks, which recently staged a campaign to attract more deposits by offering relatively higher interest rates, plan to lower deposit interest rates by 0.2-0.3% points starting Monday.

The move by banks that sank a considerable portion of their assets in national bonds, is designed to avoid negative spread after the coupon rate on three-year national and treasury bonds fell to the 6.2% level.

According to banking sources Saturday, Hanvit Bank plans to lower the basic interest rate on its ¡°Lucky Time Deposits,¡± which are to be sold until the end of about the end of February, from the present 7.2% to 7.0% beginning Monday. Seoul Bank projects to cut the basic interest rate on time deposits from 7.1% to 6.8% starting in the middle of next week, and Korea Exchange Bank will pull down the basic interest rate on its ¡°Yes, Big Joy Deposits¡± by 0.2% point.

Despite the lowering of deposit interest rates by financially healthy banks, debt-laden banks have so far refused to cut rates as part of their efforts to attract more deposits. However, an analyst said they will soon have no option but to lower their rates in order to prevent negative spread at a time when the interest rate of customer deposits stands at around 7%. This figure compares to the early stages of a 6% level for the coupon rate on national bonds, he said.