"Sharp Drop in Foreign Currency Deposits... Banks Compete: 'Open a Foreign Currency Account'"

Foreign Currency Deposits at 4 Major Banks Totaled $57.515 Billion as of Last Month End
Down from $61.21 Billion at the End of Last Year

[Asia Economy Reporter Park Sun-mi] Foreign currency deposits, which had surged to an all-time high last December due to the exchange rate investment sentiment of "buy dollars while they're cheap," have suddenly plummeted. This is attributed to the recent sharp rise in the dollar's value last month, which dampened the low-price buying sentiment. Banks, which need to increase their foreign currency Liquidity Coverage Ratio (LCR), appear to be focusing on securing funding capacity by launching numerous foreign currency deposit and savings account sign-up events.

According to the banking sector on the 17th, the foreign currency deposit balance at the four major domestic banks?KB Kookmin, Shinhan, Hana, and Woori?stood at $57.515 billion as of the end of last month. This is a decrease of $3.695 billion compared to the record high of $61.21 billion at the end of last year. It is also the first monthly decline in foreign currency deposit balances since about $2 billion dropped in September last year. The situation is similar for dollar deposits, which make up the largest portion of foreign currency deposits. The dollar deposit balance at the four major banks was $46.224 billion at the end of January, down $2.831 billion from December last year.

Accordingly, the resident foreign currency deposit balance for January, which the Bank of Korea is expected to announce soon, is also likely to decrease compared to the record high of $94.2 billion in December last year. Resident foreign currency deposits refer to domestic foreign currency deposits held by nationals, domestic companies, foreigners residing in Korea for more than six months, and foreign companies operating domestically.

The sudden decline in foreign currency deposits, which had been on the rise, is largely due to exchange rate fluctuations last month. The won-dollar exchange rate started the year in the 1,080 won range but surpassed 1,100 won by the end of January, showing a steady increase in the dollar's value. From the second half of last year, the expectation that buying dollars when cheap would yield exchange gains later had led to an increase in foreign currency deposits. However, the sudden shift to a rising dollar value atmosphere caused foreign currency deposit demand to falter.

Active Foreign Currency Deposit and Savings Account Events in the Banking Sector

However, experts emphasize the possibility of a shift to dollar weakness as risk asset preference recovers due to global economic recovery following vaccination. Banks are leveraging the atmosphere of a declining dollar value to attract foreign currency deposit and savings customers to secure foreign currency liquidity. Currently, considering the COVID-19 situation, financial authorities have lowered the foreign currency LCR for banks from above 80% to above 70% until the end of March, and the integrated LCR combining won and foreign currency from above 100% to above 85%. Nevertheless, there is a significant need to secure foreign currency liquidity in preparation for normalization.

Shinhan Bank has been running the "Lucky $2 from Someday" event for new Someday foreign currency savings accounts from the 15th until the 31st of next month. The first 5,000 customers who newly subscribe to the Someday foreign currency savings during the event period will receive a lucky $2. Industrial Bank of Korea is also conducting the "2021 Welcome New Foreign Exchange Companies" event until the end of June, offering prizes to new foreign exchange trading companies. Eligible companies are those that had no foreign exchange transactions with Industrial Bank of Korea last year or had transaction amounts below $100,000 but have accumulated foreign exchange transactions exceeding $100,000 in the first half of this year. Kookmin Bank launched the first foreign currency time deposit with an automatic customer-designated exchange rate cancellation service among commercial banks earlier this month and is running a new subscriber recruitment event until the end of March.

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