Korea Federation of Banks chairman Ha Yung-ku said Wednesday that dwindling margins are forcing local banks to raise service and transaction fees for account holders.

“The profit outlook for Korean commercial banks is grim. It is almost inevitable that they take steps to improve margins,” said Ha, a former longtime CEO of Citibank Korea, in a press conference in Seoul.

“Fees need to rise to realistic levels,” he said, adding that the current levels are too low. 

Local banks have long granted broad fee exemptions or charged only minimal fees to attract consumers. Their fee-based income totaled 6.7 trillion won in 2014, from 7.3 trillion won in 2011, according to Financial Supervisory Service data.

Raising service fees has been a sensitive issue in the banking industry. Previous moves to reduce exemptions or raise fees faced resistance from customers and government worry over their possible impact on consumer prices.

Earlier this month, Shinhan Bank announced fee hikes, including doubling the amount it charges on money wires via bank tellers from 1,000 won to 2,000 won. Other lenders are also considering similar increases.

By Lee Sun-young 
(milaya@heraldcorp.com)