Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Brokerages criticized for reaping massive profits from credit loans
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By Anna J. Park
By Anna J. Park
Local brokerages are found to be making huge profits of hundreds of billions of won by offering credit loans to customers.
According to Financial Supervisory Service (FSS) data submitted to independent lawmaker Yang Jung-suk, 29 securities companies obtained loans from the Korea Securities Finance Corp. (KSFC) at 3.02 percent interest, as of the end of September. The KSFC is the country's only capital company that offers loans to brokerages by holding stocks as collateral, and the securities companies finance some of their loans to customers using that money.
Brokerages, in turn, provide credit loans to customers at much higher interest rates, ranging from 5.55 percent to 8.92 percent, which is nearly six percentage points higher than the interest securities companies have to pay.
Given that the spread between deposits and loans at five major local banks is about 0.97 percent to 1.83 percent as of September, brokerages are enjoying loan-to-deposit margins that are some six times higher than banks by offering loans to customers.
Brokerages in particular imposed higher interest rates on credit loans with more than a five-month maturity. The average interest rates at 29 brokerages over a period of five to six months stood at 8.92 percent. Also, 21 out of the 29 brokerages impose an interest rate of over 9 percent, with Yuanta Securities charging over 10 percent, followed by interest rates of 9 percent by Samsung Securities, NH Investment, Mirae Asset Securities, Korea Investment and KB Securities.
The aggregate amount of credit loans offered by brokerages this year stands at 17.1 trillion won ($13.1 billion) as of the end of September. Mirae Asset Securities has so far provided the largest amount of credit loans worth 2.6 trillion won, followed by 2.5 trillion won by Samsung Securities and 2.4 trillion won by Kiwoom Securities.
“Brokerages' loan-to-deposit margins are surpassing those of local banks. They received low-interest loans from the KSFC, and offered them to customers at a much higher interest rate, pocketing huge profits,” Rep. Yang Jung-suk said.
“It does not make sense that brokerages, despite the fact that they require stable collateral such as stocks, still impose high interest rates when they offer loans to customers,” the independent lawmaker added.