Dollar Accumulation in Bank Accounts... Five Major Banks' Dollar Deposits Reach Year-to-Date High (Comprehensive)

Balance of Dollar Deposits in 5 Major Banks Nears $50 Billion
Increased Demand for Safe-Haven Dollar Assets Amid COVID-19 Resurgence

[Asia Economy Reporter Park Sun-mi] Last month, the dollar deposit balance at the five major domestic banks increased to the highest level this year. This is attributed to the increased demand for the safe-haven asset, the dollar, amid growing economic uncertainty due to the resurgence of COVID-19.

According to the banking sector on the 2nd, the dollar deposit balance at the five major domestic banks stood at $49.808 billion at the end of August, an increase of more than 25% compared to $39.626 billion at the beginning of the year. Most of these banks recorded their highest dollar deposit balances this year. Thanks to Bank A's dollar deposits exceeding $16.4 billion in August, the total foreign currency deposit size surpassed $20 billion. Bank E's dollar deposits also increased by more than 40%, from $8.039 billion at the end of January to $11.582 billion at the end of August.

[Image source=Yonhap News]

Bank of Korea Announces Record High Dollar Deposit Balance of $76.22 Billion as of End of July
Possibility of Record-Breaking in August as Well

If the current trend continues, the dollar deposit balance of residents for August, to be announced by the Bank of Korea later this month, is likely to break the record again.

According to the 'Resident Foreign Currency Deposit Trends' announced by the Bank of Korea on the 24th of last month, the dollar deposit balance as of the end of July reached a record high of $76.22 billion. With the sharp increase in dollar deposits, the total foreign currency deposit balance also rose to $87.4 billion, marking the largest scale and increasing for five consecutive months since March, the early stage of the COVID-19 outbreak. Resident foreign currency deposits refer to foreign currency deposits held domestically by nationals, domestic companies, foreigners residing in Korea for more than six months, and foreign companies operating in Korea.

Since the resurgence of COVID-19 began in July, companies and individuals have been rushing to secure dollars, the representative safe-haven asset. This reflects concerns that the domestic economy will not recover easily due to the COVID-19 resurgence. South Korea's economic growth rate in the second quarter was -3.2%, the worst since the fourth quarter of 2008 during the global financial crisis.

Increasing Demand from Individuals and Companies Buying Dollars While Cheap
Banks Also Conduct Foreign Currency Deposit Events Amid Rising Dollar Demand

During periods of dollar weakness, demand strengthens for accumulating funds for studying abroad and overseas asset investments in advance, and export-import companies sometimes delay converting received dollars or buy dollars in advance for future payments.

Despite the dollar deposit interest rate being around 0.2%, making it difficult to expect interest income, and the risk of exchange losses due to the weak dollar trend, these factors combined are driving funds into dollar deposits. On this day, the won-dollar exchange rate in the Seoul foreign exchange market opened at 1,185.0 won, up 2.0 won from the previous trading day.

Even in unfavorable conditions for dollar savings, demand for dollars is increasing because it is considered a safe asset, prompting banks to actively seek new foreign currency deposit sign-ups.

Shinhan Bank is currently running an event on its mobile application 'SOL' where customers who make their first-ever foreign currency deposit of $1,000 or more in won-based funds can receive dollars. NH Nonghyup Bank also held a foreign currency deposit festival until the end of last month, offering prizes to customers holding balances equivalent to $1,000 or more.

This content was produced with the assistance of AI translation services.