Declining Interest Rates on Parking Accounts and Fixed Deposits
SBI Savings Bank 'Cider' at 2.7% Annual
"Interest Rate Cuts Will Continue for a While"
Following the Bank of Korea's base interest rate cut, savings banks' deposit interest rates have been falling one after another. Not only the popular parking accounts during the rate hike period but also fixed deposit rates have declined, causing annual deposit rates in the 4% range to disappear from the savings bank industry.
According to the financial sector on the 14th, JT Savings Bank lowered the interest rate of its ‘JT Jump Up II Savings Deposit’ by 0.1 percentage points from an annual 3.8% to 3.7% for balances up to 100 million KRW as of the previous day. This product is a demand deposit account commonly known as a parking account.
SBI Savings Bank also lowered the interest rate of its ‘Cider Demand Deposit Account,’ a parking account offering the highest interest rate up to 100 million KRW without any special conditions, on the 8th. The highest interest rate dropped by 0.3 percentage points from an annual 3% to 2.7%. SBI Savings Bank had raised the parking account interest rate to 3.2% annually in early August to secure deposits but cut the highest rate by 0.2 percentage points on the 16th of last month and implemented an additional deposit interest rate cut about three weeks later.
Fixed deposit interest rates are also on a downward trend. Among the currently available one-year fixed deposit products, the highest interest rate is 3.85% annually, with deposit interest rates in the savings bank industry falling below the 4% annual range. On the day the Bank of Korea cut the base rate, the 11th of last month, five banks including CK, Daehan, Must Samil, Baro, and Joeun Savings Bank offered rates above 4% annually.
According to the Korea Federation of Savings Banks, the average interest rate for one-year fixed deposits at 79 domestic savings banks was recorded at 3.54% annually as of the previous day. This is 0.15 percentage points lower than the 3.69% recorded on the 11th of last month. This level is similar to the one-year fixed deposit interest rates (3.15% to 3.55% annually) of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup Bank).
The decline in savings bank deposit interest rates is expected to continue for some time. This is because more financial institutions have joined in lowering deposit interest rates following the Bank of Korea's base rate cut, and large-scale deposit maturities at the end of the year have prompted early fund-raising at high interest rates during August and September.
A representative from a savings bank that lowered deposit interest rates said, “Since there is no liquidity problem at the moment, we intend to keep deposit interest rates low in a situation where the base interest rate is falling.” Another savings bank official said, “As the deposit interest rates of major savings banks recently declined, new deposits have increased at our bank, leading us to partially lower our interest rates as well.”
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