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Regulator seeks to lower interest rates for margin trading

Sept. 21, 2017 - 15:56 By Yonhap
South Korea's financial regulator said Thursday it will seek to lower interest rates for margin trading and enable more people to pay their insurance fees with credit cards.

The plan is a part of the government's aim to enhance the protection of consumers for financial products as the Financial Supervisory Service launched an advisory body on the rights of financial consumers.

Interest rates for margin trading vary considerably. Kiwoom Securities Co.'s rate for 15-day margin lending is 11.75 percent per annum.

Margin trading allows investors to place large bets on stocks by using their stocks as collateral. If executed correctly, margin trading can yield a huge profit but it can also inflict significant losses on investors.
Financial Supervisory Service (Yonhap)

Lee Joon-ho, director of financial innovation bureau at the FSS, said some brokerages have applied higher interest rates for margin trading, although the key interest rate remains at a record low.

Consumers have also raised complaints that some insurance firms refuse to accept credit cards when they pay for their insurance.

The use of credit cards in insurance payments is not flourishing due to commission fees charged by credit card firms.

Last year, only 9.7 percent of total insurance payments worth 187 trillion won ($165 billion) was paid by credit cards, according to the FSS.

The 10-member advisory panel, headed by Kwon Young-june, a professor of business administration at Kyung Hee University, aims to draw up measures to better protect consumers by the end of this year.

During the first meeting of the panel, Choe Heung-sik, governor of the FSS, said consumers' distrust of financial firms is still rampant due to a lack of consumer protection.

Financial firms need to develop "consumer-oriented" business practices and the FSS will put its focus on resolving consumer complaints over financial products, Choe told the meeting, according to a statement released by the FSS. (Yonhap)