Bank interest rate falls to 5% for the first time

The averaged deposit interest rate at banks in Korea fell to an annual 5 percent level for the first time.

The Bank of Korea reported Wednesday that the averaged deposit interest rate at banks dropped by 0.16 percentage point from November to 5.95 percent in December last year. The average deposit rate is expected to have further fallen to the early stage of a 5 percent in January, as most banks, including Kookmin Bank, slashed the time deposit rate by up to 0.8 point.

The deposit-loan spread, which excluded the deposit rate from the lending rate, was 2.36 percent last year, off 0.79 percentage point from 3.15 percent in 1999. It was largely ascribable to the lowering of the averaged loan rate, which resulted from stiff competitions among banks to attract financially healthy corporate customers.

Hong Chan-Sun hcs@donga.com