As Interest Rates Rise, 5 Major Banks Attract 13 Trillion Won in Fixed Deposits in Just 3 Weeks

[Image source=Yonhap News]

[Asia Economy Reporter Buaeri] As interest rate hikes continue, more than 13 trillion won has flowed into commercial banks in just three weeks. Banks have raised deposit interest rates following the Bank of Korea's base rate hikes, resulting in deposit products with mid-to-high 3% interest rates, and the trend of surplus funds moving into time deposits is ongoing.

According to the financial sector on the 22nd, the balance of time deposits at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) reached 742.8484 trillion won (as of the 20th). This is an increase of 13.0278 trillion won compared to the end of last month (729.8206 trillion won). This figure could grow even larger after the 25th, when companies typically pay salaries. The balance of installment savings also increased by 505 billion won to 39.2278 trillion won compared to the end of last month (38.7228 trillion won). The balance of savings-type deposit products surpassed 780 trillion won, reaching 782.0762 trillion won, up 13.5328 trillion won from the end of last month (768.5434 trillion won).

This is attributed to commercial banks raising deposit interest rates by up to 0.5 percentage points last month, leading to an increase in high-interest time deposit products. Following the Bank of Korea's 0.25 percentage point base rate hike on the 25th of last month, the five major banks also raised deposit interest rates one after another. Woori Bank increased deposit and installment savings rates by up to 0.5 percentage points, while KB Kookmin, Shinhan, and NH Nonghyup Banks raised rates by up to 0.4 percentage points. Hana Bank also raised rates by up to 0.3 percentage points.

According to the Bankers Association disclosure, as of the morning of the 22nd, the representative time deposit products (12-month term) of commercial banks recorded interest rates in the high 3% range, approaching 4%. Looking at each bank, Woori Bank's 'WON Plus Deposit' offers an annual maximum of 3.94%, Hana Bank's 'Hana's Time Deposit' offers up to 3.8%, Shinhan Bank's 'Solpyeonhan Time Deposit' is at 3.75%, and KB Kookmin Bank's 'KB Star Time Deposit' is at an annual maximum of 3.56%. The time deposit products of Woori, Hana, and Shinhan Banks have even surpassed the interest rates of savings banks, which are part of the secondary financial sector. According to the Korea Federation of Savings Banks, the average deposit interest rate of savings banks as of this date is around 3.75%.

Since the possibility of further deposit interest rate hikes by banks remains open, this trend is expected to continue. The Bank of Korea is forecasted to raise the base rate further, and with the upcoming disclosure of the interest rate spread and the National Assembly audit, banks are expected to raise deposit interest rates to avoid criticism of 'profiting from interest.' A representative from a commercial bank said, "If the Bank of Korea raises the base rate, products with 4% interest rates could appear in commercial banks, and a similar trend is likely to continue for the time being."