"If High-Interest Savings Accounts Are Released, Please Contact Me"…Office Workers' 'Money Move'

Expectations Rise for High-Interest Savings and Deposit Products After BOK's Big Step
Funds Flowing into Savings and Deposits in 1st and 2nd Tier Financial Institutions

On the 7th, a scene at a bank counter in downtown Seoul shows the ongoing trend among major commercial banks to lower loan interest rates while raising interest rates on regular savings and installment savings products. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Sim Nayoung] Office worker Kim Minseong (41, pseudonym) has been looking up special savings articles from secondary financial institutions whenever he has time these days. Earlier this year, he invested his funds in a U.S. S&P 500 tracking exchange-traded fund (ETF), but the decline rate was 8.05% until this month. At that time, he was intrigued when a colleague mentioned opening a savings account with a 5% annual interest rate at a savings bank. When he went to consult about opening a savings account at the savings bank and heard that "better savings products will be released after mid-July," he immediately handed his business card to the bank clerk and earnestly asked to be contacted when the product is launched. Kim said, "These days, friends also share information about high-interest deposit and savings products in group chats."

Even after the Bank of Korea took a big step by raising the base interest rate by 0.5 percentage points (p), expectations of further rate hikes have increased, leading to a rise in 'money move waiters.' Both primary and secondary financial sectors have recently shown a clear increase in regular deposits and savings. Until last year, investment markets like stocks and coins sometimes showed a decrease compared to the previous month, but recently, the growth trend has become evident.

According to the Bank of Korea on the 16th, regular deposits at domestic deposit banks (as of May) amounted to about KRW 816 trillion (an increase of about KRW 19 trillion compared to the previous month), and regular savings totaled KRW 37 trillion (an increase of KRW 1 trillion compared to the previous month). Compared to a year ago, these amounts increased by 10.7% and 10.6%, respectively. Deposit and savings interest rates have risen by more than 1 percentage point in one year. The regular deposit interest rate at deposit banks (as of May) was 1.95%, and the regular savings interest rate was 2.06%. During the same period last year, they were 0.82% and 1.14%, respectively.

The deposit balance of secondary financial institutions (savings banks, mutual finance, credit unions, Saemaeul Geumgo, etc.) also increased by about KRW 11 trillion to approximately KRW 909 trillion as of May. Among the secondary financial institutions, Saemaeul Geumgo showed the largest increase in deposit balances. Saemaeul Geumgo's deposit balance was about KRW 232 trillion, increasing by about KRW 3.5 trillion compared to the previous month. During the same period, savings banks' deposit balances rose by about KRW 3 trillion.

Representative popular products include the 7% annual interest rate regular savings at the Bisan branch of Dongan Saemaeul Geumgo in Anyang City, Gyeonggi Province, and the 6% annual interest rate regular savings at Saemaeul Geumgo in Daerim-dong, Yeongdeungpo-gu, Seoul. The National Credit Union Federation introduced the ‘Credit Union Plus Regular Savings’ in March in partnership with Shinhan Card, offering an 8% annual interest rate. This product allows monthly payments of up to KRW 300,000 for one year, with a basic interest rate of 2.5% per annum and a preferential interest rate up to 5.5% per annum.

Hana Bank announced that starting from the 14th, it will raise the base interest rates of 30 deposit and savings products (8 deposit types, 22 savings types) by up to 0.9 percentage points. Accordingly, the ‘My Home Double-Up Savings,’ which applies double the interest rate at maturity when subscribed simultaneously with the housing subscription savings, now offers a maximum 1-year maturity interest rate of 5.5% per annum. Woori Bank also decided on the same day to raise interest rates on 21 regular deposits and 25 savings products by up to 0.8 percentage points. As a result, deposit products in the 3% range and savings products in the 4% range are expected to continue to form.