Gold Prices Rise... 60% of Savings Banks Withdraw from Gold Bar Business (Comprehensive)

Gold Bar Sales: 60% Withdrawal by Savings Banks
Gold Prices Rise but Performance Remains Weak
Industry: "Strict Regulations and Lack of Branches Are the Causes"

[Asia Economy Reporter Song Seung-seop] Despite the steady increase in gold (金) prices, 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 struggling. Due to strict regulations and insufficient branch networks, they have been unable to withstand the market conditions and are withdrawing one after another.

According to the savings bank industry on the 3rd, out of 30 savings banks selling gold bars, 18 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first in the industry to sell gold bars, but also large companies such as SBI and Korea Investment Savings Bank have withdrawn from the related business.

The sale of gold bars by savings banks is a service that acts as a sales agent for gold bars from the Korea Gold Exchange. It was implemented from 2016 under the pretext of securing additional revenue and diversifying business. At that time, the financial authorities established gold sales agency work in the standard business manual for mutual savings banks and allowed the sale of eight types of products ranging from 3.75g to 1kg, leading 24 companies to start. Later, six more companies joined, increasing the number to 30 at one point, but many companies withdrew citing business feasibility.

Sales of Gold Bars by Savings Banks Sluggish Due to Industry Regulations

Industry insiders say that the gold bar sales business of savings banks has never been successful regardless of the size of the industry. An official 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 nonexistent," adding, "It can be said that the performance was not just insufficient but almost none." He also hinted, "I understand that even those currently maintaining gold bar sales have almost no transactions."

This situation of savings banks contrasts with the trend where gold prices soared due to unstable global economies and related financial products gained popularity. According to Woori Bank’s gold price inquiry service, when gold bar sales started, the gold price was 46,549 KRW per gram (g), jumped to the 60,000 KRW range at the beginning of last year, and reached a record high of 78,550 KRW in August. Although prices declined after a correction, they maintained 66,351 KRW as of the 2nd of this month.

Thanks to this, commercial banks set daily records for gold bar sales performance and scale last year, and the number of gold banking subscribers also increased significantly. On the 18th, a gold bar set priced at around 2.85 million KRW, released by Emart24 as a Seol gift product, sold out for two consecutive days.

In the case of savings banks, they were only allowed to sell but 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 1g increments or selling silver bars is not permitted.

"Few Branches and Low-credit Customers Make Gold Sales Difficult," Voices Heard

Especially, due to the nature of gold bar trading, which is done offline by physically inspecting the product, savings banks with fewer branch networks than commercial banks are said to be less competitive. 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 the gold bar business has been sluggish because the main customers of savings banks are low-credit individuals. 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 for them to go to savings banks to buy gold when they usually buy it through commercial banks or asset managers."

He added, "Savings banks mainly conducted business targeting people with low assets, so they could not enjoy the gold boom."

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