Gold Prices Soar... Savings Banks Sequentially Withdraw from Gold Bar Business

60% of Savings Banks Selling Gold Bars Withdraw
Despite Rising Gold Prices, Savings Banks Alone Show Poor Performance
Industry: "Strict Regulations and Lack of Branches Are the Causes"

[Asia Economy Reporter Song Seung-seop] Despite the steady increase in the price of gold, a representative safe-haven asset, due to the expansion of global economic uncertainties caused by the US-China trade dispute and the impact of COVID-19, savings banks handling gold bars have been particularly struggling. Due to strict regulations and insufficient business networks, they have been unable to withstand the market and are withdrawing one after another.

18 out of 30 Savings Banks Withdraw from Gold Bar Business

According to the savings bank industry on the 3rd, 18 out of 30 savings banks selling gold bars have discontinued the related business. Not only Accuon Savings Bank (formerly HK Savings Bank), which was the first in the industry to sell gold bars, but also major companies such as SBI and Korea Investment Savings Bank have withdrawn from the related business.

The sale of gold bars by savings banks began in 2016 under the pretext of securing ancillary profits and diversifying services. At that time, the financial authorities allowed the establishment of gold sales agency services in the standard business manual for mutual savings banks, and 24 companies started the business. Later, six more companies joined, increasing the number to 30 at one point, but many companies withdrew citing business feasibility.

Industry insiders say that the gold bar sales business of savings banks, regardless of the industry scale, was never successful. A representative from a savings bank that sold gold bars said, "We thought it was a good business and started actively, but the goal of securing stable profits was so insignificant that it was almost meaningless," adding, "It was not just a lack of performance, but it can be said that there was almost none."

Gold Prices Rise, but Savings Banks’ Performance Remains Minimal

This situation of savings banks contrasts with the trend where gold prices soared and related financial products gained popularity amid unstable global economies. According to Woori Bank’s gold price inquiry service, the gold price per gram was 46,549 KRW when gold bar sales started, but it jumped to 66,351 KRW as of the 2nd. Last year, commercial banks’ gold bar and gold banking sales records were broken daily in terms of scale and growth, and on the 18th, a 2.85 million KRW gold bar set released by Emart24 sold out for two consecutive days.

In the case of savings banks, only sales were permitted, but they were not free from various regulations, so they could not benefit, according to views inside and outside the industry. Unlike commercial banks, savings banks’ gold bar sales business is subject to positive regulation. Only gold bar sales specified in the standard business manual are allowed, and opening gold banking accounts that allow investment in gold by 1 gram or selling silver bars is not permitted.

In particular, savings banks’ branch networks are significantly smaller than those of commercial banks, which is pointed out as a disadvantage in competitiveness. Even top-tier companies have only about 10 offline branches, and the number of existing branches is decreasing. An industry insider said, "You have to look very hard to find even one or two savings bank branches," adding, "Unless there is a huge price advantage, people who want to buy gold bars have no choice but to go to nearby commercial banks."

There is also an opinion that since the main customers of savings banks are low-credit individuals, the high-priced gold bar business inevitably underperforms. Professor Sung Tae-yoon of Yonsei University’s Department of Economics explained, "Gold is basically a high-value and volatile product, so people with large asset holdings mainly trade it," adding, "There is no reason to go to savings banks to buy gold when they usually buy it through commercial banks or asset managers."

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