China cuts off Kim's accounts

The outlook just got a little worse for Kim Jong-un as a major Chinese bank has refused to do business with one of his financial institutions. Picture: AFP Source: AFP

ONE of China's biggest banks has halted business with a North Korean bank accused by the US of financing Pyongyang's missile and nuclear programs in the latest sign of Beijing's displeasure with its estranged ally.

The state-run Bank of China Ltd has notified the Foreign Trade Bank of North Korea that its account or accounts were being closed and all financial transactions suspended, said a bank spokeswoman, reading a brief statement.

The spokeswoman for the Beijing-based bank did not identify the number of accounts closed or provide further details.

The move comes after the Chinese leadership, installed last year, has shown growing frustration with North Korea's young leader, Kim Jong-un, and the nuclear and missile tests his government has conducted, aggravating regional tensions.

In recent months, Beijing has displayed willingness to work with Washington to apply pressure, from signing on to UN sanctions to issuing a statement with US Secretary of State John Kerry last month urging North Korea to abandon its nuclear programs.

China is North Korea's economic lifeline, providing nearly all of its fuel and most of its trade. North Korea's economic dependence on China is rising, following a standoff with South Korea that effectively shut an industrial park that was an important source of hard currency.

As North Korea warns foreign residents to leave South Korea for safety -- a mixed reaction in Seoul and China. Deborah Lutterbeck reports.

The Bank of China's suspension of business further complicates the ability of the Foreign Trade Bank, North Korea's main foreign exchange bank, to access a key financial market.

In March, the US Treasury Department imposed sanctions against the Foreign Trade Bank, effectively cutting it off from the US financial system and urged Beijing to do the same.

The department called the bank a "key financial node" in North Korea's programs to develop weapons of mass destruction.

It said the Foreign Trade Bank had financed other banks and companies already targeted by sanctions, including assisting in millions of dollars in transactions for the Korean Mining Development Corp., a major arms dealer.
 

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Offset accounts may cause an upset

Offset accounts can save you big bucks. Source: National Features

MORTGAGE holders using offset accounts are risking paying fees and using partially effective accounts without even knowing.

Research by comparison website RateCity found 75 per cent of variable home loan providers offer offset accounts but about one in 10 charge an account-keeping fee.

Some accounts are not 100 per cent effective they are partially effective with interest costs charged on the offset account balance.

RateCity spokeswoman Michelle Hutchison says it is important account holders fully understand what sort of offset account they are signing up for.

"They need to find out if they are 100 per cent effective or partially effective because it will make a big difference," she says. "They also need to know if the offset account charges a monthly fee because the fee might outweigh the interest that they will be offsetting."

Hutchison says fees and partial-offset accounts can hit first-home buyers the hardest because they often have small amounts of cash sitting in these types of accounts after making their first property purchase.

Offset accounts are a tax-effective way to save on interest charges because you don't pay tax on the money you stash away, as opposed to putting money into savings accounts and investments.

RateCity found that of the offset accounts that come at a cost, the average account-keeping fee is $7.81 a month.

For a homeowner with a $300,000 mortgage and a 6 per cent interest rate, a $7.81 monthly fee could result in the borrower missing out on more than $3000 over 30 years.

Suncorp Bank executive manager Craig Fenwick says there is a few ways to get the "best bang for your buck" from offset accounts.

"First you must maximise the amount of money you have in that account ... for example your salary is going into that account," he says. "It comes back down to your individual circumstances about how big your loan is, what your interest rate is paying on that loan, how much you might pay for the facility and also how much money you have offsetting against that home loan."

Fenwick says savers with cash deposits may find it more beneficial to have their money in an offset account and available "at-call" while also reducing the interest on their home loan, rather than locking it away in a term deposit.

HSBC Bank Australia's head of mortgages, Alice Del Vecchio, says every cent counts in an offset account. "Every dollar makes a difference."

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