'High-Interest Parking Accounts' Are a Thing of the Past
SBI Savings Bank Lowers Interest Rates for 3 Consecutive Months
Some Savings Banks Cut Rates 5 Times in 2 Months
As interest rates enter a downward trend, savings banks' parking account interest rates are also steadily decreasing. Savings banks find it difficult to aggressively expand their business, and since they secured the necessary operating funds last summer, it is expected that high-interest deposit products will be hard to find for the time being.
According to the financial sector on the 31st, Welcome Savings Bank will lower the basic interest rate (for balances up to 100 million KRW) of its demand deposit account, 'Welcome Main Transaction Account,' from 1.7% per annum to 1.3% per annum, a 0.4 percentage point decrease, starting tomorrow (the 1st).
However, by partially increasing preferential interest rates and meeting all preferential interest conditions, customers can still receive the previous 3.3% annual interest rate. For example, if the condition of 'using simple payment or spending over 100,000 KRW with a check card' is met, the interest rate premium will increase from the previous 0.1% per annum to 0.5% per annum starting next month. A Welcome Savings Bank official stated, "This is a strategy to activate services such as simple payments and check cards in a situation where overall market interest rates are expected to decline."
As the year-end approaches, savings banks are rapidly lowering the deposit interest rates on parking accounts. JT Savings Bank's 'JT Jump Up II Savings Deposit' had a top interest rate of 3.8% per annum in early last month but has since dropped by 0.7 percentage points to 3.1% per annum. The rate was lowered five times in total: to 3.7% on the 13th of last month, 3.6% on the 20th, 3.5% on the 26th, 3.35% on the 11th of this month, and 3.1% on the 24th.
SBI Savings Bank has also been lowering parking account interest rates for three consecutive months. The 'Cider Demand Deposit Account,' which offers the highest interest rate up to 100 million KRW without any conditions, was reduced from 3.2% per annum in mid-October to 3.0%, then to 2.7% on the 8th of last month, and further to 2.5% on the 6th of this month. This amounts to a 0.7 percentage point decrease over the past three months.
In line with the downward trend in interest rates, OK Savings Bank also adjusted the interest rate on its parking account, 'OK Jjantech Account,' on the 13th. The interest rate for balances between 500,000 KRW and 100 million KRW dropped by 0.3 percentage points from 3.0% to 2.7% per annum.
The continuous decline in deposit interest rates is due to the difficulty savings banks face in actively conducting business even when they attract funds. Due to the challenging economic environment, delinquency rates have surged in real estate project financing (PF) and loans to self-employed and small business owners provided by savings banks. As of the end of the third quarter this year, the average delinquency rate in the savings bank industry was 8.73%, up 0.37 percentage points from the previous quarter.
Savings banks also secured deposits early by raising parking account interest rates or launching high-interest 'special promotion' products around the 8th to 9th of this month. According to the Bank of Korea's Economic Statistics System, savings bank deposit balances have increased for three consecutive months after recovering the 100 trillion KRW mark in August.
A savings bank official explained, "After the Bank of Korea lowered the base interest rate, deposit interest rates in the financial sector began to decline, and savings banks are adjusting their rates by comparing with other banks. Since large-scale deposit maturities are scheduled at the end of the year, they also secured funds early at high interest rates about three months ago."
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