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A few days ago a 41-year-old office worker named Lee visited a bank to deposit 155 euros left over from his summer vacation into his foreign currency account. Lee was quite surprised when the bank clerk asked for a deposit fee. "You charge a fee even though I'm depositing my own money into my own account?" Lee asked. "We don't charge a fee if you deposit U.S. dollars, but we do when you deposit other foreign currencies," the clerk said. In the end, Lee had to pay W2,900 (US$1=W942) or 1.5 percent to deposit the money.
A Chosun Ilbo survey has found that other banks are also charging deposit fees. They don't charge deposit fees for U.S. dollars, but if you deposit euros into your foreign currency account, Korea Exchange Bank, Kookmin Bank, and Citibank each charge 1.5 percent and Shinhan Bank charges 3 percent. It's the same amount for Japanese yen, but even higher for Chinese yuan and Australian and New Zealand dollars. It's discrimination on the part of the banks, favoring people who carry U.S. dollars to people who carry other currencies.
Why should you have to pay a fee to deposit your money into your own account? A foreign currency deposit official at a bank said, "We can resell U.S. dollars any time because there's so much demand. But since there's little demand for other currencies, we have to re-export the left-over currencies to Hong Kong and other areas. We have to pay high costs for their transportation and storage and personnel expenses." Another bank said, "In the case of U.S. dollars, we can use them. It's easy to find where we can invest them. But it's hard to find where we can properly invest other foreign currencies, which are classified as 'nonperforming assets.' So we have to charge deposit fees for them." But this logic suggests that the banks are imposing on their customers their own expenses incurred from their poor ability to manage global assets. It will be hard for the banks to avoid public criticism for this practice. According to their logic, the role of the bank is a "fee-charging cash depository."
Some customers could suffer dearly on the high deposit fees, considering the very low interest rates of foreign currency accounts. If you deposit 100 euros into a foreign currency account, you'll earn some W1,500 in annual interest. But you have to pay W2,000 (1.5 percent) to deposit the funds, meaning you'll lose W500. It's the tail wagging the dog.
Let's look at what foreign banks are doing in Korea. HSBC, a British bank, doesn't charge a fee when its customers deposit any foreign currency. Hong Kong banks charge fees only if the deposit amount exceeds a certain limit. For example, Standard Chartered Bank charges 0.25 percent if you deposit more than US$2,000, 1,000 euros, or 150,000 yen. The fee is uniform for all currencies. Japanese banks charge both deposit and withdrawal fees for foreign currencies. They charge one yen per dollar when you deposit U.S. dollars, but three yen per dollar when you withdraw them. According to the Bank of Korea, foreign currency deposits in Korea totaled some US$22.4 billion as of the end of July. Non-dollar currencies accounted for $4.2 billion of that amount, with yen deposits reaching $2.6 billion and euro deposits $1.33 billion.
(englishnews@chosun.com )
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