The financial district of Yeouido in Seoul. (Yonhap)
SEOUL, Dec. 21 (Korea Bizwire) — South Korean securities firms were found to be borrowing at low interest rates but issuing loans to customers at significantly higher rates, the country’s financial regulator said Tuesday.
Brokerage firms had borrowed funds at an interest rate of 3.02 percent as of Sept. 29, but the interest rates for credit lending to customers ranged from 5.55 percent to 8.92 percent depending on the credit lending period, creating a difference of 2.53 to 5.90 percentage points, according to the Financial Supervisory Service and the Korea Securities Finance Corp.
Considering that the loan-deposit margin at five major commercial banks in September was between 0.97 and 1.83 percentage points, profits at securities firms were six times higher.
The value of funds that brokerages borrowed from the Korea Securities Finance as of September was 7.68 trillion won (US$5.98 billion), at the average interest rate of 3.02 percent.
In contrast, the interest rate for credit lending to customers stood at an average of 5.55 percent from day one to day seven of the lending period. From day 151 to day 180, the rate went up to an average of 8.92 percent.
As of September, brokerage firms earned 194.4 billion won each year if the difference between the interest rate of borrowing and lending to customers was at the minimum of 2.53 percentage points.
At the maximum gap of 5.90 percentage points, profits amounted to 453.4 billion won.
Ashley Song (ashley@koreabizwire.com)
