Shaking Even International Affairs... Continuous 'Reverse Money Move' of Market Funds into Banks

Commercial Banks' Demand Deposits Increase by 17 Trillion Won in February

[Asia Economy Reporter Yu Je-hoon] The reverse money move phenomenon, where market funds flow into banks, continues. This is due to interest rate hikes and recent international turmoil such as the war between Russia and Ukraine.

According to the financial sector on the 5th, as of the 28th of last month, the total deposit balance of the five major commercial banks (KB Kookmin, Shinhan, Woori, Hana, NH Nonghyup) was 1,792.8602 trillion KRW. This is an increase of 4.3082 trillion KRW compared to the end of the previous month.

In particular, demand deposits showed a sharp growth trend. The demand deposit balance of the five major banks was 717.6545 trillion KRW, an increase of 17.3254 trillion KRW compared to the previous month. Demand deposits, which are checking accounts, have a strong nature of being on standby for investment.

On the other hand, household loans have decreased for two consecutive months. As of the end of last month, the household loan balance of the five major commercial banks was 705.9373 trillion KRW, down 1.7522 trillion KRW from the previous month.

The cause of this reverse money move phenomenon is attributed to the interest rate hikes that have continued since last year, as well as the asset market adjustment caused by the Russia-Ukraine war that broke out in February.

The financial sector believes that this reverse money move phenomenon is likely to continue for the time being. This is because the Bank of Korea is considering additional interest rate hikes this year. Although the Bank of Korea's Monetary Policy Committee froze the base rate last month, considering inflationary pressures and the US interest rate hike trend, it is highly likely that there will be two to three additional hikes within the year. The prolonged Russia-Ukraine war is further fueling this.

A financial sector official said, "Not only did global stock markets shake around the outbreak of the war, but instability in the world economy has expanded due to raw material crises, causing market liquidity to return to banks," adding, "Since the Russia-Ukraine war is becoming prolonged and the interest rate hike trend remains, this phenomenon is expected to intensify for the time being."

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