South Korea's top five banks saw demand deposits plunge over 40 trillion won this month as of May 23, while time deposits surged by 22 trillion won, according to data reported on May 26. The shift follows a month-long stock market correction and the Bank of Korea's decision to raise its base rate from 2.50% to 2.75%, prompting investors to move funds from equities into higher-yielding fixed-income products. Kookmin, Shinhan, Hana, Woori, and Nonghyup banks recorded combined demand deposit balances of 681.2585 trillion won as of May 23, down 41.0343 trillion won from the end of last month—individual deposits fell 14.9242 trillion won and corporate deposits dropped 22.8006 trillion won. Securities firm investor deposits also declined 17.3365 trillion won this month to 104.2975 trillion won as of the same date, marking a retreat from the record 139.6948 trillion won on May 4. The outflows coincide with major banks raising time deposit rates into the 3% range and savings banks offering products as high as 4.45%, attracting both retail and corporate cash seeking stable returns amid heightened market volatility.
Demand Deposits at Top 5 Korean Banks Fall 41 Trillion Won This Month
As of May 23, demand deposit balances at Kookmin, Shinhan, Hana, Woori, and Nonghyup banks totaled 681.2585 trillion won, a decline of 41.0343 trillion won from the end of last month, according to data cited by the Korea Economic Daily on May 26. Individual deposits contracted by 14.9242 trillion won, while corporate deposits fell 22.8006 trillion won. If the trend continues through month-end, the decrease will mark the largest monthly drop since July 2022, when demand deposits fell 38.2454 trillion won. Demand deposits are classified as standby investment funds because account holders can withdraw them at any time.
Securities firm investor deposits, another key indicator of standby capital, stood at 104.2975 trillion won as of May 26, down 17.3365 trillion won this month. Investor deposits represent funds that investors park at brokerage firms to trade stocks, funds, and other financial products, and are considered potential inflows to the stock market. These deposits peaked at 139.6948 trillion won on May 4 (last month) and rose to 136.8314 trillion won on May 23 (last month), shortly after the KOSPI index hit an all-time high of 9,114.55. Deposit balances typically increase when investor sentiment toward equities strengthens. On May 23, deposits edged higher but remain at risk of falling below the 100 trillion won threshold.
Major Banks Raise Time Deposit Rates to 3% Range Following Rate Hike
Reflecting the Bank of Korea's rate increase and rising market interest rates, all major banks now offer flagship time deposit products with annual rates in the 3% range. Savings banks have rolled out products yielding over 4%.
Shinhan Bank adjusted its 1-year Sol Convenient Time Deposit rate from 2.9% to 3.2% on May 21. The bank is also running a special promotion for its 44th anniversary, selling the Shinhan My Plus Time Deposit with a 1 trillion won cap at up to 3.3% annually for 1-year terms through the end of this month.
Woori Bank raised deposit and savings rates by 0.25 to 0.30 percentage points starting May 20, applying a 3.30% annual rate to its First Transaction Preferential Time Deposit.
Savings banks are competing with rates reaching the mid-4% range. As of May 26, Double Savings Bank offered the highest rate at 4.45% for its Compound Interest Time Deposit, followed by Dongwon Jeil Savings Bank's Revolving Time Deposit at 4.41% and Baro Savings Bank's SB TokTok Time Deposit at 4.40%.
Time Deposits at Top 5 Banks Rise 22 Trillion Won Amid Market Volatility
The combination of the base rate hike and stock market correction has driven both individual and corporate standby funds into fixed-rate products such as time deposits and bonds. Time deposit balances at the top five banks rose 22.3374 trillion won this month to 971.7372 trillion won. After the Bank of Korea raised the base rate from 2.50% to 2.75%, commercial banks raised deposit rates in tandem, prompting idle market funds to flow back into time deposits as a safe asset. This month, demand deposits and securities investor deposits at the five banks and brokerages fell sharply, while time deposits attracted over 22 trillion won. Corporations are also withdrawing funds from on-demand accounts and placing surplus cash into products offering 3% to 4% annual returns.
FAQ
Q: Why did demand deposits at South Korea's top 5 banks fall over 40 trillion won this month?
A: Demand deposits at Kookmin, Shinhan, Hana, Woori, and Nonghyup banks fell 41.0343 trillion won as of May 23 compared to the end of last month, driven by a month-long stock market correction and the Bank of Korea's base rate increase from 2.50% to 2.75%, which led investors to shift funds into higher-yielding time deposits.
Q: What interest rates are major Korean banks offering on time deposits following the rate hike?
A: Shinhan Bank raised its 1-year time deposit rate to 3.2% on May 21 and is offering up to 3.3% annually for a limited promotion. Woori Bank increased rates by 0.25 to 0.30 percentage points starting May 20, with its First Transaction Preferential Time Deposit at 3.30%. Savings banks are offering rates as high as 4.45%.
Q: How much did securities firm investor deposits decline this month in South Korea?
A: Securities firm investor deposits fell 17.3365 trillion won this month to 104.2975 trillion won as of May 26, retreating from a record high of 139.6948 trillion won on May 4.
