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Wed, February 2, 2022 | 21:08
Policies
Bank of Korea under fire for misusing budget
Posted : 2019-10-01 16:58
Updated : 2019-10-01 17:47
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                                                                                                 Bank of Korea headquarters in Seoul / Yonhap
Bank of Korea headquarters in Seoul / Yonhap

By Park Jae-hyuk

The Bank of Korea (BOK) has come under criticism since it was found to have used the government budget ― not its own welfare fund ― to offer personal home-backed loans to its employees at extremely low interest rates.

According to Rep. Kim Young-jin of the ruling Democratic Party of Korea, Tuesday, the BOK has offered housing loans to its employees at 1.5 percent to 1.9 percent annual interest rates over the past five years.

During the period, the average annual interest rates for housing loans was around 3 percent at the nation's commercial banks.

According to a guideline of the Ministry of Economy and Finance, public institutions, when using state budget, should provide housing loans for their employees at an interest rate commensurate to that offered at commercial banks.

The BOK, however, sidestepped the guideline, because of its status as a "special corporation without capital," which is different from "public institutions" as specified in the guideline.

Kim called for more rigorous monitoring of the BOK's loan offering practice, defining it as preferential treatment.

The BOK's lax management has especially enraged low-income groups, given that most of them, who borrowed money at higher interest rates, failed to refinance their loans with a special loan product that the government introduced recently.

According to the Financial Services Commission, among 635,000 people who applied for the government's special loan product for low-income groups, 365,000 failed to qualify for it.

"A BOK employee who borrowed 50 million won ($41,760) from the central bank could save 750,000 won on average annually," the lawmaker said.

"The extremely low interest rates for central bank employees can be regarded as a privilege among most low-income people who have had no choice but to get around banks to lower their interest rates by at least 0.01 percentage points."

                                                                                                 Bank of Korea headquarters in Seoul / Yonhap
A counter for personal mortgage loans at a commercial bank in Seoul / Yonhap

The BOK said the criticism is excessive, considering the practical benefits its employees can get.

"Our employees who borrow money at preferential interest rates have to pay income tax during the year-end tax adjustment, so the actual benefits they get are not big enough," said a BOK official in charge of salary and benefit.

"Given that an individual employee can borrow up to 50 million won through our in-house mortgage loan service, it does not give practical benefits to our employees, considering the country's housing prices these days."
Emailpjh@koreatimes.co.kr Article ListMore articles by this reporter



 
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