Turning Back to Deposits Amid Stock Market Weakness and Interest Rate Hikes

[Asia Economy Reporter Song Hwajeong] As uncertainty in the stock market expands due to the Ukraine crisis and interest rates rise, preference for safe assets is strengthening, leading funds to flow back into savings and time deposits.

According to the Bank of Korea's "Monetary and Liquidity" report for December 2021, time deposits and savings with maturities under two years increased by 20.5 trillion KRW. The balance of time deposits at the five major commercial banks (Kookmin, Shinhan, Woori, Hana, and Nonghyup) stood at 673.8412 trillion KRW (including corporate funds) as of the 11th, up 11.8813 trillion KRW from the end of last year (661.9599 trillion KRW).

In particular, products offering high interest rates are attracting many subscribers. Seoul Sinchon Saemaeul Geumgo conducted a special sale of time savings deposits with a maximum annual interest rate in the 5% range for five consecutive days from the 7th to the 11th, targeting the first 120 customers each day. This product is a one-year maturity product with a monthly deposit limit of up to 500,000 KRW. If one deposits 500,000 KRW monthly for one year, totaling 6 million KRW, they can receive approximately 137,500 KRW in interest after tax. To subscribe to this product, people lined up early in the morning, creating a so-called "open run."

The Youth Hope Savings, a policy financial product launched by the government targeting young people, also attracted a large number of applicants and gained popularity. This product offers an effective interest rate of 9-10% annually through government incentives and tax-exempt benefits. Due to the unexpectedly high number of applicants, the government allowed all eligible youth to subscribe until the 4th of next month. The budget for the Youth Hope Savings program this year is 45.6 billion KRW, which can support about 380,000 subscribers if all subscribe at the monthly deposit limit of 500,000 KRW. The preview service for Youth Hope Savings saw about 2 million inquiries (including duplicates) from the five major commercial banks alone, and on the first day of subscription, the 21st, some banks' apps experienced access failures due to the surge in applications, prompting the government to expand the program's operation.

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