Savings Banks Offering 'Yeoreum Teukpan'... Filling Deposit Vaults in Advance for the Second Half (Comprehensive)

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

Savings banks are unusually rushing to launch high-interest-rate "summer special" products. This move is interpreted as a response to the expectation that securing deposits may become difficult due to large-scale public offering subscriptions in the second half of the year and the end of regulatory easing. They are also competing to raise deposit interest rates to attract funds.

According to the industry on the 6th, SBI Savings Bank raised its 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 had bottomed out at 1.1?1.5% in March. SangSangIn Savings Bank also raised its fixed deposit interest rate to a maximum of 2.21% (1-year maturity) earlier this year, a significant increase of 0.51 percentage points from before. They applied an interest rate of 2.11% even to parking accounts that pay interest for just one day.

SBI Savings Bank raised its 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 had bottomed out at 1.1?1.5% in March. Earlier this year, SBI Savings Bank had lowered deposit interest rates five times in a row. The last deposit interest rate increase was on December 31 of last year.

OK Savings Bank has raised its basic deposit interest rate relatively steeply by implementing four consecutive deposit interest rate hikes. In April, they raised the ISA (Individual Savings Account) fixed deposit interest rate by 0.2?0.3 percentage points depending on the period, bringing it up to 0.7?1.3%. Eight days later, they further increased the interest rate of the product by 0.25?0.3 percentage points, and also raised the OK Safe Fixed Deposit interest rate by 0.1 percentage points each.

Special promotions for savings and installment savings accounts 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 ranges from 1.95% to 2.05% annually depending on the period. KB Savings Bank also released special promotions for savings and installment savings 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. The Korea Federation of Savings Banks also introduced a 10% annual installment savings special promotion. This product was sold for two months starting in May to commemorate the launch of open banking, allowing monthly payments of up to 100,000 KRW for one year.

With Public Offering Subscriptions and Regulatory Easing Ending... Savings Banks Race to Secure Deposits

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 this date.

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 because large-scale deposit maturities occur at the end of the year, or there is a need to secure deposit capacity in advance for first-half operations. However, the industry explains that at the end of last year and early this year, abundant liquidity combined with demand to earn even a small amount of interest sufficiently filled the deposit coffers of savings banks.

It is analyzed that these measures are 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. There is concern that customers aiming for an early "ttasang" (opening price twice the IPO price followed by the upper limit price) may massively withdraw funds. When Kakao Games' public offering subscription was conducted earlier, it is estimated that about 400 billion KRW was withdrawn from large savings banks.

The fact that some regulatory easing measures will end at the end of September also seems to have had an impact. The savings bank industry is subject to relaxed regulations on liquidity coverage ratio (LCR) and loan-to-deposit ratio due to COVID-19. It is considered advantageous for savings banks to secure funds while it is easy to attract liquidity.

An official from a savings bank said, "For savings banks, raising funds is the priority no matter what," adding, "This is to secure deposits for second-half operations, public offering subscription schedules, and pressure from mid-interest-rate loans." He also added, "There is also an intention to attract more customers by offering higher deposit interest rates compared to commercial banks."

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