Banks lower deposit rates The Korea Herald By Kim Yoon-mi Feb. 28 – Local commercial banks are lowering deposit rates as interest rates for certificates of deposit decline and funding becomes easier, industry sources said yesterday. CD rates, which surged to 5.89 percent on Jan. 10, fell 0.7 percentage point to 5.19 percent as of Tuesday, according to the Bank of Korea. According to bank officials, Shinhan Bank cut the interest rate on one-year deposits to 5.5 percent on Tuesday from 6.7 percent in early January. Kookmin Bank and Hana Bank also reduced deposit rates by 0.2 percentage point Monday, with annual time deposit interest rates staying between 5.3 percent and 5.8 percent per year. Other banks, including the Industrial Bank of Korea and Woori Bank, are also following suit, scrapping or lowering premium interest rate offers that were temporarily given to deposit customers when the banks suffered an exodus of deposits late last year. However, the return of investors to banks during a recent stock market correction and increased loan commission fees have helped banks fund capital more easily, said Daewoo Securities analyst Yoon Yeo-sam. "Because there is market anticipation that the Bank of Korea might cut interest rates some time this year, CD rates are likely to go down further below 5 percent," he said. "In that case, commercial banks will cut deposit rates further." Yoon said the central bank will find it challenging to lower the key interest rate in March due to stubbornly high inflation, but it will slash rates once or twice starting from the second quarter. The BOK will not be able to ignore the 2 percentage point interest rate gap between the 3 percent federal funds rate of the U.S. central bank and Korea's 5 percent call rate, he added.
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