Domestic Top 4 Banks Simultaneously Raise Savings and Deposit Interest Rates... Up to 0.4%P Increase

Maximum Increase in Spread 0.40%P
Raised More Than the Base Rate Increase of 0.25%P

On the 25th, as the Bank of Korea raised the base interest rate from 0.75% to 1.0% per annum, commercial banks began increasing interest rates on savings and time deposits. The photo shows a notice related to savings and time deposits posted on the exterior wall of a bank in downtown Seoul on the same day. Photo by Moon Honam munonam@

[Asia Economy Reporter Park Sun-mi] The four major commercial banks?KB Kookmin, Shinhan, Hana, and Woori?immediately raised their savings and deposit interest rates following the Bank of Korea's base rate hike. This is an unusually quick response compared to the typical application within a week after a base rate increase. The rate hike was also larger, with a maximum increase of 0.4 percentage points, exceeding the 0.25 percentage point base rate hike. This is interpreted as a response to social criticism regarding the large gap between savings/deposit rates and loan rates.

According to the financial sector on the 27th, Shinhan Bank will raise interest rates on 36 types of fixed and installment savings accounts by up to 0.40 percentage points starting from the 29th. With this rate hike, the representative flagship products "Annyeong, Bangawo" installment savings will have a maximum annual interest rate of 4.2% for a 1-year term, and the Shinhan Al.Ssol installment savings will have a maximum annual interest rate of 2.6% for a 1-year term.

Additionally, the 1-year Didim Seed installment savings interest rate will increase by 0.4 percentage points to 2.05% annually, and the 3-year Future Plan Crevasse pension savings will be applied at an interest rate of 1.85% annually, up 0.3 percentage points.

A Shinhan Bank official stated, "In line with the recent rise in market interest rates and the Bank of Korea's base rate hike, we have also raised customers' savings and deposit interest rates," adding, "We plan to launch a new ESG-related fixed deposit product (1-year term) with an annual interest rate of 1.8% in early December."

KB Kookmin Bank will also raise interest rates on 17 types of fixed and marketable deposits and 26 types of installment savings, including the KB Dugun Dugun Travel installment savings, by up to 0.40 percentage points starting from the 29th.

For the non-face-to-face exclusive product KB Companion Happiness installment savings, the maximum interest rate for a 3-year term will change to 3.10% annually, and the KB Double Moa deposit will change to a maximum annual interest rate of 1.80% for a 1-year term. In particular, KB Kookmin Bank will raise interest rates on preferential products related to small business owners, such as the KB Merchant Preferential installment savings and Business Preferential installment savings, by up to 0.40 percentage points to express its determination to overcome COVID-19.

Accordingly, the maximum interest rate for the 3-year KB Merchant Preferential installment savings will rise from the previous 2.10% annually to 2.50%, and the Business Preferential installment savings will increase from 2.45% annually to 2.85%. Additionally, the interest rate on the ESG-specialized product KB Green Wave 1.5℃ fixed deposit will also be raised by 0.30 percentage points to a maximum annual rate of 1.7% for a 1-year term.

Earlier, Woori Bank and Hana Bank also raised their savings and deposit interest rates by up to 0.40 percentage points. Hana Bank raised interest rates on five types of installment savings, including the main transaction Hana monthly compound interest installment savings, by 0.25 to 0.40 percentage points starting from the 26th. From the 29th, interest rates on seven types of installment savings, including Challenge 365 installment savings, and six types of fixed deposits, including 369 fixed deposits, will also be raised by 0.25 percentage points.

Woori Bank also raised savings and deposit interest rates by up to 0.40 percentage points starting from the 26th. Interest rates on 19 fixed deposits and 28 installment savings products all increased. Most of the savings and deposit products on sale saw interest rate increases of 0.20 to 0.40 percentage points, and demand deposit products also rose by 0.10 to 0.15 percentage points.

Why Such a Large Increase?

It is interpreted that the financial authorities' close monitoring of the widening gap between deposit and loan interest rates in the banking sector influenced the banks' decisions on the scale of deposit interest rate hikes. On the 23rd, Financial Supervisory Service (FSS) Governor Jeong Eun-bo told reporters that while they would not intervene in the banks' decisions on deposit and loan product interest rates, they are closely watching the widening gap and examining its causes.

The FSS has previously convened deputy heads of banks to inspect the interest rate calculation system. The FSS pointed out that banks excessively emphasize the highest interest rates when selling savings and deposit products, but the actual rates received fall short of these, and recently issued a consumer alert 'Caution' regarding the sale of savings and deposit products offering preferential rates.

When banks sell special savings and deposit products, they advertise high rates by listing the highest interest rate in the key explanation documents, but the interest paid to matured customers averages only 78% of the highest rate (average of 21 matured products). The background is attributed to banks requiring customers to meet complex and difficult preferential interest rate conditions such as registering for open banking, achieving usage performance of affiliated products, and pension transfer performance to qualify for the highest interest rate (base rate + preferential rate).