Hana Daetoo Securities since May 26 has sold a cash management account with annual interest of 4.1 percent for up to three million won (2,426 U.S. dollars). Considering the regular annual rate for such an account is just 2.6 percent, Hana is being quite generous. More than 70,000 people have deposited 310 billion won (250 million U.S. dollars) in the account, whose sale will continue through late next month. This has exceeded the securities companys target of 50,000 subscribers. Samsung Securities since early this month has guaranteed an annual interest rate of four percent on the same type of account. Hi Investment Securities will offer until Aug. 4 interest of 4.2 percent for three months no matter how long the deposits are for, and Hyundai Securities 4.1 percent with no limit in the duration of deposits. These changes stem from Februarys effectuation of the Financial Market Consolidation Act.
Thirteen brokerages will be allowed to conduct payment settlement from Aug. 4, while the remaining stock companies can do so within years end. When that happens, account holders at securities companies can withdraw, deposit or transfer money at ATM machines. In the wake of the acts effectuation, securities companies took a bold move with high-yield cash management accounts to carve out a bigger share of the customer base. For the same reason, a flurry of credit cards was also introduced by securities companies last month. As a result, customers have more financial products to choose from and can earn higher yields.
Banks cannot afford to leave the situation unchecked. They have raised interest rates to retain customers who deposit their monthly wages in their bank accounts. The average interest on savings accounts reached an eight-month high of 2.96 percent last month. Many banks also gave regular customers preferential rates on loans and foreign currency transactions, and exempted them from certain fees. Banks and securities companies are poised to further intensify their marketing showdown next month. A customer can now have one bank and one brokerage as his or her main banking service provider, and enjoy services from both.
An ad by Korea Investment Securities reads, Ushering in an era of CMA banking, spawning controversy. Banks say non-banking financial institutions should not be allowed to use the terms bank or banking. The Korea Financial Investment Association, however, said, In advanced countries, financial institutions use the term investment bank even if the bank is not engaged in depositing and lending. In the wake of financial market consolidation, the financial community must cooperate with each other to increase the size of the pie, rather than compete in the limited conventional financial market. In Korea, non-financial assets account for 80 percent of all household assets, but financial assets take up only 20 percent, about a third of those in the U.S. and Japan.
Editorial Writer Hong Kwon-hee (email@example.com)