[Heated Deposit Competition] ① 4% Range Savings & 5% Range Parking Accounts... Banks, Securities Firms, and Savings Banks

Banks, savings banks, and securities firms are engaged in a 'deposit highland battle' to attract idle funds from the market. Due to the rise in bank bond yields and the reinstatement of loan-to-deposit ratio regulations, commercial banks, which had previously withdrawn 4% range deposit products, have reintroduced them. Meanwhile, savings banks and securities firms are responding by raising interest rates on demand deposit accounts and Comprehensive Asset Management Accounts (CMA), also known as parking accounts.

According to the Bankers Association on the 21st, SC First Bank's 'e-Green Save Deposit' offers a maximum annual interest rate of 4.2% for a one-year term (as of the 20th). Sh Suhyup Bank's 'Hey Time Deposit' and 'Sh First Meeting Preferential Deposit' offer maximum annual rates of 4.0% and 4.02%, respectively. BNK Busan Bank's 'The Special Time Deposit' also provides a maximum annual interest rate of 4.0%. These rates exceed those of savings banks. According to the Korea Federation of Savings Banks, the average interest rate for one-year time deposits at 79 savings banks was recorded at 4.01% per annum.

Deposits at the five major banks are also approaching 4%. The representative one-year term deposit products of KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup banks offer maximum annual interest rates ranging from 3.70% to 3.90%. Specifically, NH All One e-Deposit offers 3.90%, KB Star Time Deposit 3.71%, Woori Bank's WON Plus Deposit 3.73%, Shinhan Bank's 'Solpyeonhan Time Deposit' and Hana Bank's 'Hana Time Deposit' both offer 3.70% interest rates.

The rise in deposit interest rates in the banking sector is due to regulators tightening liquidity regulations such as the Liquidity Coverage Ratio (LCR) and loan-to-deposit ratio, which had been relaxed but are now being reinforced from this month. Banks urgently need to secure funds to comply with these regulations, leading to an increase in deposit interest rates. The rise in bank bond yields has also influenced this trend. One-year time deposits are mainly priced based on the one-year bank bond yields. According to the Korea Financial Investment Association, the one-year bank bond yield (unsecured, AAA rated) rose from 3.554% on April 19 to 3.837% on July 19.

In response to the banking sector's aggressive moves, savings banks, which have seen a reduction in deposit volumes, are gradually raising deposit interest rates. According to the Korea Federation of Savings Banks, the average interest rate for one-year time deposits at 79 savings banks was 4.01% as of the previous day, up 0.03 percentage points from 3.98% at the beginning of the month. Savings banks are particularly raising interest rates on demand deposit accounts, known as 'parking accounts.' Although the cost of interest payments is lower than that of time deposits, the product's nature allows for quick fund mobilization.

SBI Savings Bank, the industry leader, has increased parking account interest rates up to 3.50% annually since last month. This is about 1.0 to 1.5 percentage points higher than the parking account rates of internet-only banks that sparked the parking account craze last year. Additionally, OK Savings Bank offers the 'OK Eut Million Account II,' which provides up to 5% annual interest including preferential rates for balances under 1 million KRW, and Daol Savings Bank offers the 'Fi Connect Account,' which provides 4% interest including preferential rates for balances under 10 million KRW.

Securities firms are also competing with banks and savings banks through Comprehensive Asset Management Accounts (CMA). Especially in the first half of the year, the popularity of CMA accounts, which offer mid-to-high 3% returns, surged due to the decline in deposit interest rates at banks and savings banks. According to the Korea Financial Investment Association, CMA balances reached 68.4902 trillion KRW at the end of the last half-year, a 19.1% (10.9866 trillion KRW) increase compared to 57.5036 trillion KRW at the end of last year. Although balances have recently decreased due to rising deposit interest rates, CMA accounts still offer mid-3% returns, maintaining a competitive stance against banks' and savings banks' parking accounts.

Other similar products from securities firms continue to be popular. Meritz Securities' 'Super 365 Account,' launched at the end of last year, surpassed 100 billion KRW in deposited assets within seven months. This product, similar to CMA accounts, adds automatic repurchase agreement (RP) buy and sell functions to provide daily compound interest income on deposits. KB Securities' 'Automatic Deposit Piggy Bank' service, which automatically transfers leftover funds after stock investments to a night-issued note-type CMA daily to pay earnings and then moves them back to the stock account, has also exceeded 300 billion KRW in subscription amounts.

An industry insider said, "Although bank deposit interest rates may not return to last year's levels, they are expected to show a slight upward trend for the time being. If this continues, savings banks will have no choice but to raise deposit rates to prevent deposit outflows, and securities firms will inevitably be affected as well."