Due to COVID-19, 'Bubo Deposits' Increased by 3.8% in Q1... Financial Investments Surge

Forecast, Announcement of 'End of March Deposit Insurance Trends'

[Asia Economy Reporter Ki Ha-young] Due to the impact of the novel coronavirus infection (COVID-19), the stock market plunged and financial market volatility expanded, resulting in an increase in insured deposits eligible for depositor protection in the first quarter of this year.

According to the "Deposit Insurance Trends as of the End of March 2020" announced by the Korea Deposit Insurance Corporation on the 15th, the total balance of insured deposits in the financial sector as of the end of March this year was 2,338.8 trillion KRW. This represents a 3.8% (86.5 trillion KRW) increase compared to the end of last year.

Insured deposits refer to deposits protected by the Korea Deposit Insurance Corporation (including bank and savings bank deposits, investor trust funds of financial investment companies, insurance companies' reserve funds, and CMA accounts of comprehensive financial companies), excluding deposits where the depositor is the government, public institutions, or insured financial companies.

By business sector, insured bank deposits as of the end of March this year amounted to 1,413.5 trillion KRW, marking a 4.4% (60 trillion KRW) increase from the end of the previous year. Due to increased uncertainty in domestic and international financial markets, demand for safe assets such as bank deposits expanded, with a notable rise in demand deposits, which serve as standby funds. Demand deposits at the end of March totaled 222.6 trillion KRW, surging 8.8% (18.1 trillion KRW) compared to the end of last year.

Insured deposits at financial investment companies reached 49.3 trillion KRW, a sharp increase of 55.6% (17.6 trillion KRW) from the end of last year. This was influenced by a surge in stock purchase demand following the stock price plunge. In particular, individual insured deposits increased by 59.0% compared to the end of last year, indicating an inflow of personal funds into financial investment companies.

On the other hand, insurance companies' insured deposits, represented by reserve funds, stood at 812.4 trillion KRW, increasing by only 1.0% (8.3 trillion KRW) from the end of last year. The growth rate of insurance companies' reserve funds continues to slow due to the economic downturn and low interest rate environment, which have led to a contraction in long-term savings-type insurance growth.

Insured deposits at savings banks amounted to 62 trillion KRW, up 0.8% (500 billion KRW) from the end of last year. Among them, insured deposits of 26 large savings banks with assets exceeding 1 trillion KRW increased by 1.2% (600 billion KRW) compared to the end of last year, while insured deposits of 54 savings banks with assets below 1 trillion KRW decreased by 0.6% (100 billion KRW) over three months. Unprotected deposits exceeding the 50 million KRW insurance limit among savings bank deposits totaled 7.73 trillion KRW, down 4.0% from the end of last year.

Meanwhile, the number of insured financial companies remained unchanged at 321 as of the end of last year. The Korea Deposit Insurance Corporation collected 300 billion KRW in deposit insurance premiums from insured financial companies during January to March this year.