Korean Auditor Asks Financial Regulator to Boost Rate Oversight
South Korea’s national auditor asked the country’s financial regulator to strengthen supervision of banks after finding that they didn’t pass on central bank interest-rate cuts sufficiently to borrowers.
Lenders “unreasonably” charged extra yields, undermining the Bank of Korea’s policy rate cuts since 2008 and burdening companies and households, the Board of Audit and Inspection of Korea said today in a statement on its website. The auditor said it advised the Financial Supervisory Service governor to come up with measures to correct the practice.
The auditor’s findings may fuel criticism of banks after the country’s antitrust agency last week said it is probing nine lenders and 10 brokers over possible fixing of a key lending rate. South Korea’s Financial Services Commission and related agencies met last week to discuss developing a short-term rate that can replace the certificate of deposit rate and find ways to enhance transparency in its calculation.
The 91-day certificate of deposit rate is a benchmark for banks’ variable rate for lending and borrowing as well as for interest swaps or floating yields for bonds. Quotes are collected twice a day by the Korea Financial Investment Association, or KOFIA, from 10 brokerages.
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