More than a million Koreans have opened tax-efficient Individual Savings Accounts in banks in the first month since its launch here, but more than 70 percent of the accounts were found to have a balance of less than 10,000 won ($8.50), industry data showed Monday.

Since Korean lenders began introducing their first tax-exempt ISAs, in March, some 1,362,800 accounts have been opened, with 631.1 billion won of subscriptions until April 15.




This means that the average subscription for ISAs stands at 463,000 won. However, accounts with deposits of less than 10,000 won accounted for 73.4 percent of the total, according to the Financial Supervisory Service.

“Nearly empty accounts are overflowing as financial firms have been excessively competing with each other to attract more customers,” said Rep. Min Byeong-doo of the Minjoo Party of Korea, who requested the data from the financial regulator.

Experts have expressed concerns over such problems since the early days of the introduction of the new savings products which allows customers to hold a wide range of retail investment vehicles in one single arrangement with a financial company.

The investing program products launched by securities companies also suffered a similar setback, despite government push to boost household wealth through the program.

During the month, savers amassed a total of 387.7 billion won in 142,800 accounts.

When it comes to the average amount, accounts in security firms had six times as much money than those in banks. But over 36 percent of the accounts had balance of less than 10,000 won.

Competition between local banks and brokerage firms to gain a better foothold in the market as well as restrictions that savers cannot withdraw their money for three to five years could take a toll on the vitalization of the ISA system, they said.

"Those with low incomes will be able to deposit more money if the financial firms allow them to withdraw freely,” said Kim Jae-Chil, a director at Korea Capital Market Institute.


By Park Han-na (hnpark@heraldcorp.com)