This Year’s Savings and Deposits Surpass 60 Trillion Won... All In on Living Expenses or Stock Investment

Increase in Early Terminations Due to COVID-19 Business Closures
Impact of Fund Movement from Stock Investments Also Noted

[Asia Economy Reporter Kim Min-young] This year, the total amount of savings and fixed deposits prematurely terminated before the contract period expired at the five major commercial banks (Shinhan, KB Kookmin, Hana, Woori, NH Nonghyup) has reached 60 trillion won. This is interpreted as a result of many self-employed people shutting down their businesses due to the novel coronavirus infection (COVID-19) and an increase in low-income individuals facing layoffs and financial difficulties. Additionally, the stock market boom also played a role as people broke their savings and fixed deposits to invest.

According to the banking sector on the 12th, as of the end of last month, the cumulative amount of savings and fixed deposits terminated at the five major banks was 60.462 trillion won. This is an 8.05% (4.5067 trillion won) increase compared to 55.9544 trillion won during the same period last year. The number of terminations also rose by 4.95%, reaching 5,125,574 cases from January to last month, compared to 4,883,660 cases in the same period last year.

Premature Termination Due to Financial Hardship

The termination of savings and fixed deposits is fundamentally influenced by financial difficulties such as a lack of living expenses. Especially this year, it appears that the number of terminations increased due to family economic hardships caused by business closures and unemployment amid COVID-19.

An industry insider said, “Since money has no ‘label,’ it is impossible to know the exact reason why money was withdrawn from savings and fixed deposit accounts, but it is presumed that people broke their accounts to urgently secure funds due to business closures or unemployment.”

According to Statistics Korea, the number of employed persons decreased by more than 420,000 compared to October last year. While the number of regular workers classified as permanent employees increased by only 14,000, temporary and daily workers decreased by 260,000 and 60,000 respectively. This indicates that COVID-19 has caused greater damage to the family economy of low-income groups.

Withdrawing Money from Accounts to Invest in Stocks

However, a peculiar phenomenon has been observed this year. While some withdrew money from savings and fixed deposits due to financial hardship, many others moved funds to jump into the stock market, which ignited after the crash caused by COVID-19 in March.

This is also reflected in the numbers. In March alone, the amount of savings and fixed deposits terminated at the five major banks reached 8.3155 trillion won. Although it cannot be definitively said that all this money flowed into the stock market, the nearly 3 trillion won increase in terminations compared to the same period last year (5.4743 trillion won) can hardly be explained by anything other than the COVID-19 outbreak and the stock market crash. Compared to February’s 5.7859 trillion won, about 2.53 trillion won more was withdrawn in one month, and industry insiders believe a significant portion of this flowed into the stock market.

The monthly number and amount of savings and fixed deposit terminations also increased significantly from June to October compared to the same months last year. During this period, stock market volatility increased compared to the first half of the year, but there were consecutive initial public offerings (IPOs) from companies that attracted market attention, such as SK Biopharm (July), Kakao Games (September), and Big Hit (October). A new stock subscription craze emerged, requiring a minimum deposit of 20 million won to receive one share of public offering stock.

An official from the banking sector said, “Individuals who have ‘all-in’ invested their accumulated money in stocks and experienced short-term profits are increasingly dissatisfied with the interest rates on savings and fixed deposits,” adding, “With various factors such as the Korean New Deal policy, the possibility of a COVID-19 vaccine, and the conclusion of the U.S. presidential election, the stock market is in an upward trend, so money that had been staying in savings and fixed deposits is expected to continue flowing into the stock market for the time being.”

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