As Interest Rates Rise... Bank Time Deposits Attracting Spare Cash

Stock and Virtual Asset Market Slump Drives Attention to Banks "Expected to Continue for a While"

On the 25th, as the Bank of Korea raised the base interest rate from 0.75% to 1.0% per annum, commercial banks began increasing interest rates on savings and time deposits. The photo shows a notice related to savings and time deposits posted on the exterior wall of a bank in downtown Seoul on the same day. Photo by Moon Honam munonam@

[Asia Economy Reporter Yoo Je-hoon] Last month, fixed deposits at major commercial banks showed an increase of over 11 trillion won. This is attributed to the combined effects of rising interest rates and the continued sluggishness in the stock and cryptocurrency markets, which led to more pocket money flowing into bank fixed deposits.

According to the financial sector on the 5th, fixed deposits at the five major commercial banks (KB Kookmin, Shinhan, Woori, Hana, NongHyup) increased by 11.84 trillion won from the previous month, reaching 666.7769 trillion won. The total deposit size, including demand deposits, also approached the 1,800 trillion won mark at 1,788.552 trillion won.

The primary reason for the increase in fixed deposits is attributed to the interest rate hikes. Since the Bank of Korea raised the base rate three times last year, commercial banks have been launching deposit products with interest rates in the 2% range.

The sluggishness in the stock market and virtual asset market is also a major factor driving funds into fixed deposits. In fact, the KOSPI index has struggled to recover since falling below the 3,000 mark at the end of last year, and the virtual asset market is experiencing increased volatility amid the U.S. interest rate hike trend.

The financial sector expects this trend of concentration in fixed deposits to continue, given the considerable possibility of further base rate hikes this year. An industry insider said, "The rise in fixed deposit interest rates due to rate hikes, along with the sluggish stock and virtual asset markets, is driving the expansion of fixed deposit volumes. Considering the likelihood of additional rate hikes this year, shortening the deposit period to benefit from rising interest rates is also a viable strategy."

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