Rapid Increase in Savings Banks' Subordinated Deposits Due to High Interest Rates

Total Deposits of 2,590 Trillion KRW in March
Savings Banks Increased by 7.1% Compared to End of Previous Quarter

Trend of insured deposits. ( ) indicates the growth rate compared to the end of the previous quarter for total insured deposits. Photo by Korea Deposit Insurance Corporation

[Asia Economy Reporter Song Seung-seop] While insured deposits in Korea showed only a slight increase, insured deposits in the savings bank sector were found to have grown significantly.

According to the "Insured Deposits Trends as of the End of March 2021" released by the Korea Deposit Insurance Corporation on the 29th, the total insured deposits as of March reached 2,590.7 trillion KRW. This represents a 2.2% increase compared to the end of the previous year, which is a slight decrease of 1.0 percentage point from the 3.2% growth rate recorded in the previous quarter.

Insured deposits refer to deposits protected by the Deposit Insurance Corporation (including bank and savings bank deposits, investor trust deposits at financial investment companies, insurance company reserve funds, and CMA accounts at comprehensive financial companies), excluding deposits where the depositor is the government, local governments, or insured financial institutions.

The savings bank industry saw a sharp increase in insured deposits compared to other sectors, driven by higher interest rates on deposits. Total insured deposits reached 76.4 trillion KRW, up 7.1% (5.1 trillion KRW) from 71.3 trillion KRW at the end of the previous year. This growth rate is the highest since the 7.2% increase recorded at the end of March 2008.

On the other hand, insured deposits at financial investment companies, which recorded the highest growth rate of 19.1% at the end of last year, decreased by 2.7% (2 trillion KRW) to 72.5 trillion KRW. The Deposit Insurance Corporation explained that this decline was due to stock market adjustments in the first quarter.

Insured deposits at insurance companies continued to decline due to the impact of low interest rates, which have constrained growth in the long-term insurance market. These insured deposits represent a type of reserve fund set aside from premiums to prepare for future insurance payments and cancellations. The growth rate compared to the previous quarter was 0.7%, marking two consecutive quarters of growth rates in the 0% range following 0.6% in the previous quarter.

Insured deposits at banks increased by 3.1% from 1,551.9 trillion KRW at the end of the previous year to 1,599.4 trillion KRW.

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