Annual 5.8% Fixed Deposits Quickly 'Sold Out'... "Let's Catch the Last Train"

Recently, Saemaeul Geumgo, which experienced a bank run (mass withdrawal of deposits), is showing signs of a recurrence of last year's 'reverse money move' phenomenon, with some unit Geumgos introducing high-interest deposit products offering nearly 6% annual interest. In some unit Geumgos, these products have been sold out immediately after launch, attracting the attention of investment-savvy customers.

According to the financial sector on the 8th, the Nodeul Saemaeul Geumgo located in Dongjak-gu, Seoul, recently launched a special fixed deposit product with a maximum annual interest rate of 5.8%, which sold out on the 6th after exhausting its sales limit. Additionally, the Wangsimni Central Saemaeul Geumgo in Seongdong-gu, Seoul, also sold out its fixed deposit product with a 5.8% annual interest rate the day before after reaching its limit.

The products offered by these Geumgos apply a base interest rate of 5.5% per annum plus a preferential rate of 0.3% per annum, making them the highest interest rates among fixed deposit products recently offered by deposit-taking institutions. Although the sales limits for these special products were not small, they were all sold out immediately after launch, according to the Geumgo representatives.

The cause of the sell-out situation, which was seen during last year's rapid interest rate hikes, is attributed to the market perception that the base interest rate has effectively reached its peak. A reverse money move trend is also being observed in the first-tier financial sector beyond Saemaeul Geumgo. The five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) saw fixed deposits increase by 22.7 trillion KRW over July and August.

From the Saemaeul Geumgo perspective, following the bank run crisis in July, the maturity of fixed deposits attracted last year at high interest rates is approaching, creating incentives to secure deposits. According to the Bank of Korea, the weighted average interest rate on one-year fixed deposits at Saemaeul Geumgo was only 2.32% as of January last year, but rose to 4.68% in October after the Legoland incident and further increased to 5.48% in December amid lingering bond market tightness.

A financial sector official said, "Although the situation was resolved quickly due to prompt intervention by authorities, some unit Geumgos may need to expand deposits, so they seem to have taken preemptive action," adding, "As the maturity of fixed deposit products sold last year begins, they had no choice but to raise interest rates to prevent capital outflows."

Within the industry, it is expected that deposit interest rates at financial institutions will rise as existing deposit products mature, but the likelihood of a deposit competition similar to last year is considered low. Other financial sectors besides Saemaeul Geumgo are also responding to re-deposit demand by slightly raising deposit interest rates, but the changes are not significant. As of the previous day, the fixed deposit interest rates at major commercial banks ranged from 3.75% to 3.80%, and the average deposit interest rate at savings banks was only 4.15%.

A savings bank official stated, "Since the fluctuation in deposit interest rates is not large, there is no trend of deposits moving from savings banks to commercial banks, nor is there a flow to other sectors like Saemaeul Geumgo due to the previous bank run crisis," adding, "The industry itself is tightening soundness management, so there is little incentive to engage in aggressive deposit attraction campaigns."