[Re-deposit Battle]② Signs of Reverse Money Move... 4% Range Deposits 'Revival' Even at Commercial Banks

Rising Market Interest Rates Lead to Increase in Deposit Interest Rates

As 4% interest rate time deposit products are gradually making a comeback in the primary financial sector, including commercial banks, they are attracting financial consumers whose existing deposit products are nearing maturity. The financial sector expects that with market interest rates likely to rise for the time being, the reverse money move phenomenon caused by deposit interest rate hikes could accelerate.

According to the Korea Federation of Banks on the 28th, the interest rates (simple interest) for major 1-year maturity time deposit products at 18 domestic banks (commercial, regional, and internet-only banks) as of the 25th were recorded between 2.70% and 4.10%. This marks the revival of 4% range time deposit products that had once disappeared.

SC First Bank's 'e-Green Save Time Deposit' offers an annual interest rate of 4.10% including preferential conditions, which is the highest level among banks. Following closely are DGB Daegu Bank's DGB Together Deposit (4.05% per annum) and iM Smart Deposit (4.00%), sh Suhyup Bank's sh First Meeting Preferential Deposit (4.02%), and BNK Busan Bank's The Special Sale Time Deposit (4.00%). Additionally, although not a deposit product, IBK Industrial Bank offers up to 4.03% annual interest through its short-term SME financial bond product, the IBK D-DAY account.

The rise in deposit interest rates in the banking sector is explained by the normalization of the loan-to-deposit ratio regulation and the increase in market interest rates. Since last month, the loan-to-deposit ratio regulation has been normalized (from 105% to 100%), leading banks to secure additional deposits. Moreover, with the growing possibility of prolonged tightening by the U.S. Federal Reserve (Fed), market interest rates have been on the rise.

According to the Korea Financial Investment Association, the yield on 1-year bank bonds, which serves as the benchmark rate for 1-year time deposits, reached the 4% range at the beginning of the year, dropped to around 3.5% during April and May, and has recently been hovering around 3.8% to 3.9%.

As a result, banks' deposit balances have recently increased significantly. According to the Bank of Korea, the balance of time deposits in the banking sector stood at 957.7 trillion KRW at the end of last month, up 12.3 trillion KRW from the previous month.

The deposit balances across the entire financial sector, which increased due to the sharp reverse money move phenomenon last year, are also expected to have an impact. According to the Bank of Korea, the balance of time deposits at commercial banks rose from 790 trillion KRW in January last year to 991 trillion KRW in November, an increase of about 200 trillion KRW. During the same period, 1-year to less than 2-year time deposits increased by 61 trillion KRW from 454 trillion KRW to 515 trillion KRW, leading the growth along with time deposits under 6 months (which increased by 129 trillion KRW).

A representative from a commercial bank said, "With concerns that tightening will be prolonged, market interest rates are steadily rising, and accordingly, bank bond yields are also gradually increasing. Due to this influence, banks are likely to increase the proportion of deposits, and it is expected that the number of savers seeking bank time deposits will also rise for the time being."