San-eun Launches 'No.1' New Deal Deposit... Follow-up Uncertain Amid Deposit Product Neglect (Comprehensive)

In the Atmosphere of 'Sold Out' for the People's Participation Policy New Deal Fund
San-eun Launches the 'No. 1' New Deal Deposit

[Asia Economy Reporter Park Sun-mi] As the 국민참여정책형 New Deal Fund gained popularity with some funds selling out on the first day of sales on the 29th, the banking industry also launched the first New Deal time deposit. However, in an era of low interest rates where bank deposit products are being ignored by consumers, it is uncertain whether follow-up New Deal deposit products will be released by banks.

According to the financial sector on the 30th, KDB Industrial Bank launched the ‘first’ New Deal time deposit the day before and began sales at branches and online. This deposit, named the ‘Green New Deal Time Deposit,’ is the first New Deal time deposit offered by the Industrial Bank and will be sold until May 10. The launch date was also aligned with the 29th, when 15 financial companies simultaneously began selling the 국민참여 New Deal Fund.

Currently, the Industrial Bank is the only bank offering New Deal deposits. Financial consumers who want to participate directly or indirectly in the Korean New Deal policy can choose either to subscribe to the 국민참여 New Deal Fund, which has a 4-year closed structure with no early redemption at this time, or to take out a New Deal deposit maturing after one year.

The Green New Deal Time Deposit, designed with a total scale of 3 trillion won, has the advantage of a shorter maturity period compared to the New Deal Fund. The interest rate is also set the highest among currently sold deposit products. The structure offers higher interest rates as the total sales amount increases; customers who subscribe at branches can receive up to 1.30% per annum, and those using online non-face-to-face channels can receive up to 1.35% interest.

As a leading policy financial institution in Korea, the Industrial Bank put considerable effort into this product, which was launched with the New Deal label for the first time. Besides setting the highest interest rate among recently launched deposit products, Chairman Lee Dong-geol of the Industrial Bank became the ‘first’ subscriber.

After subscribing, Chairman Lee said, "The Industrial Bank, which has led Korea’s economic development for the past 67 years, is now pushing for a major role transformation as a policy financial institution leading the Korean New Deal and green finance," and added, "I hope many citizens will join the journey with the Industrial Bank to find new growth engines for Korea." The funds collected through this product will be used as resources for the Korean New Deal and green finance policies. In line with the purpose of attaching the ‘New Deal’ label to the deposit product, the Industrial Bank plans to conduct ESG (Environmental, Social, and Governance) social contribution activities linked to the sales amount.

Will Industrial Bank’s New Deal Deposit Signal Follow-up Releases in the Banking Sector?

However, the impact of the New Deal time deposit on the banking sector is viewed with caution.

Although the four major financial holding companies have declared their active participation in the government’s New Deal policy, no deposit products with the ‘New Deal’ label have been released by commercial banks. Industry insiders find it surprising that the Industrial Bank launched a New Deal deposit product amid a situation where deposit interest rates are falling and consumers are turning away. There is talk that follow-up New Deal deposit products may be difficult to come by in the banking sector.

Among the 49 time deposit products from 18 banks disclosed by the Korea Federation of Banks, excluding the Industrial Bank’s New Deal time deposit, the product offering the highest current interest rate is K Bank’s Code K Time Deposit (1.30%). Only 13 products, about 30%, offer a base interest rate in the 1% range, while the rest offer interest rates in the 0% range.

Most of the 1% range interest rates are offered by internet banks, policy banks, regional banks, or foreign banks. According to the Bank of Korea’s ‘February 2021 Weighted Average Interest Rates of Financial Institutions’ statistics, the pure savings deposits of deposit banks (0.83%) fell by 0.02 percentage points last month, mainly in time deposits, and market-type financial products (0.92%) also dropped by 0.02 percentage points, mainly CDs, resulting in an average savings deposit interest rate decrease of 0.02 percentage points.

An official from a commercial bank explained the banking sector’s reluctance to launch New Deal time deposits by saying, "Since the first New Deal Fund is a product that practically preserves a significant portion of the principal, consumers who want to participate in the New Deal policy are naturally drawn to funds that offer principal protection and higher return opportunities rather than low-interest deposit products."

Meanwhile, the 국민참여 New Deal Fund is a private placement fund investing mainly in equity and mezzanine securities issued by companies in the New Deal sector. It is structured as a 200 billion won fund investing in the profit certificates of 10 sub-funds operated as private equity funds. The advantage of the New Deal Fund is that each private equity fund is not liable for losses until about 21.5% loss occurs. The sales companies include seven banks: IBK Industrial, KB, KDB Industrial, NH Nonghyup, Shinhan, Woori, and Hana Bank, and eight securities firms: IBK, KB, Yuanta, Korea Investment, Hanwha, Korea Post Securities, Shinhan, and Hana Financial Investment.

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