Bank deposits at Korean major banks swelling at rapid pace to record high
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The outstanding balance of deposit accounts at Korea’s top 5 commercial banks – KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup – came to 799.8 trillion won on Sept. 30, 2022, adding a whopping 31.3 trillion won from the previous month.
Monthly increase was mostly in fixed deposits, accounting for more than 90 percent. Fixed deposits at the five banks increased by 30.7 trillion won in a month to record 760.5 billion won at the end of September.
Recurring deposits also shot up rapidly, adding 586.9 billion won to 39.3 trillion won.
In contrast, balance of checking accounts, including money market deposit account, offering ultra-low interest rates of around 0.1 percent, plunged. The balance recorded 670.8 trillion won at the end of September, down 4.3 trillion won versus a month ago.
Short-term deposit is in greater demand than long-term deposit as interest rates rise at fast pace. Reflecting the trend, some banks are now offering higher interest rates on deposits for less than two years than savings for longer period. A Woori Bank product offers an annual interest rate of 4.5 percent for money deposited for 12 to 24 months, while offering 4.3 percent on 3-year fixed deposits. A Hana Bank product offers the highest 4.15 percent on deposit shorter than two years.
The unusual trend of short-term deposits paying higher interests than long-term type comes as banks joint pessimism about the economy. When the economic growth slows down, businesses reduce investment and borrow less from banks. This, in turn, makes it unnecessary to retain deposits for long term by offering high interest rates. The central bank is expected to deliver more interest rates hikes, which would mean higher interest for banks to pay on deposit accounts.
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