Flood of Savings Banks' 'Summer Special Offers'... Secure Loan Funds Now to Survive

July Deposit Interest Rate 1.82%... Up 0.2%p in 2 Months
Concerns Over Fund Outflow Due to Large IPO Subscription Schedule in Second Half
Strategy to "Secure Deposits Early" Before Regulatory Easing Ends

[Asia Economy Reporter Song Seung-seop] The savings bank industry is unusually conducting a high-interest rate "summer special sale." This is interpreted as a judgment that securing deposits may be difficult due to large-scale public offering subscriptions in the second half of the year and the end of deregulation. They are also competing to raise deposit interest rates, focusing on securing funds.

According to the industry on the 6th, SBI Savings Bank raised deposit interest rates to 1.3-1.8% on the 21st of last month. This is the result of two consecutive increases in the interest rates of its own deposit products, which hit bottom at 1.1-1.5% in March. SangSangIn Savings Bank also raised the fixed deposit interest rate to a maximum of 2.21% (1-year maturity) earlier this year. This is a significant increase of 0.51 percentage points from before. They also applied an interest rate of 2.11% to parking accounts that pay interest even if deposited for just one day.

Special promotions for savings and fixed deposits are also continuing. The savings bank industry launched more than eight special promotion products in the second quarter alone. JT Chin-Ae Savings Bank launched a fixed deposit special promotion with a limit of 50 billion KRW starting from the 2nd. The interest rate level is 1.95-2.05% per annum depending on the period. KB Savings Bank also released special promotions for savings and fixed deposits to commemorate 2 trillion KRW in loan assets. The deposit limit is 50 billion KRW, and the installment savings limit is 1,000 accounts, offering maximum interest rates of 2.1% and 3%, respectively. Overall, interest rates in the savings bank industry are on the rise. According to the Korea Federation of Savings Banks, the deposit interest rate, which bottomed out at 1.61% in May, rebounded to 1.82% as of the previous day.

Money Outflow Concerns... Raising Interest Rates and Flood of Special Promotions

This contrasts with the previous quarter when special promotions had dried up. Typically, special promotion products are launched around the end of the year and before and after Lunar New Year. This is often because large-scale deposit maturities occur or deposit capacity needs to be secured in advance for first-half operations. However, at the end of last year and early this year, abundant liquidity coincided with demand to earn even a penny of interest, resulting in plentiful deposits in savings banks.

It is analyzed as a measure to block the impact of the large-scale public offering subscriptions scheduled for the second half of the year. Currently, KakaoBank, Krafton, and KakaoPay are preparing for initial public offerings (IPOs). Customers aiming for public offering shares are likely to withdraw funds massively. During Kakao Games' public offering subscription, it is estimated that about 400 billion KRW was withdrawn.

Another reason is that the deregulation measures will end at the end of September. The savings bank industry is subject to relaxed regulations on liquidity coverage ratio (LCR) and loan-to-deposit ratio due to COVID-19. A savings bank official explained, "For savings banks, securing deposits is a priority no matter what," adding, "It is better to secure funds when it is easy to attract liquidity."

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