[Reverse Market Interest Rates]③ Open Run Is a Thing of the Past... High-Interest Special Offers Disappear

As Commercial Bank Deposit Rates Fall,
High-Interest Savings and Time Deposits in Mutual Finance Sector Decline
6% Interest Deposits Becoming Hard to Find

On the morning of October 27 last year, citizens waiting in line before business hours to sign up for a special installment savings account in front of Gwanak Credit Union in Seoul. Photo by Yonhap News

[Asia Economy Reporter Bu Aeri] High-interest special promotions on savings and time deposits in mutual finance sectors have noticeably disappeared recently. This is in stark contrast to a few months ago when people lined up from early morning for 'open runs' to join these special promotions.

According to the National Credit Union Federation of Korea on the 13th, there were zero high-interest special savings promotions conducted at credit unions in the Seoul area from November to December last year, meaning none at all. This is a significant decrease compared to October last year, when as many as 12 credit unions in Seoul held special savings promotions.

The situation is similar for the National Federation of Fisheries Cooperatives. According to them, the number of cooperatives conducting special savings and time deposit promotions (limited to the Seoul area) decreased monthly from 20 in October last year to 10 in November, and 6 in December.

The noticeable reduction in high-interest special promotions in the mutual finance sector is due to financial authorities urging restraint on excessive deposit interest rate competition, coupled with recent declines in deposit interest rates at major commercial banks, reducing the factors for offering high rates. A mutual finance sector official explained, "When commercial banks raise interest rates, mutual finance institutions tend to match or exceed those levels to attract customers, leading to continuous interest rate competition. However, as rates have recently fallen significantly, mutual finance sectors are following that trend."

As commercial bank deposit interest rates fell to the 3% range, 6% level deposits, which were commonly found in mutual finance sectors, have disappeared. For example, Seoul Chuksan Saemaeul Geumgo in Seongdong-gu, Seoul, offered a 6.3% annual interest rate for the 12-month 'Kkumdeulim Rotating Time Deposit' just two months ago, but now offers 5.5%. In Seoul, Daemyeong Credit Union in Dongdaemun-gu's 'Union Time Deposit' and Gwanghee Credit Union in Jung-gu's 'Power Time Deposit' previously offered rates close to 6% at 5.8%, but now have dropped to 5.5% and 5.4%, respectively.

However, Saemaeul Geumgo and Credit Unions, which still offer products with higher interest rates compared to commercial banks, showed a slight increase in deposit balances. In November last year, Saemaeul Geumgo and Credit Unions recorded deposit balances of 244.6025 trillion KRW and 127 trillion KRW, respectively, increasing by 5.3944 trillion KRW and 2.1 trillion KRW compared to the previous month. Looking at the provisional figures for last month, Saemaeul Geumgo's deposit balance was about 251 trillion KRW, also an increase of approximately 6 trillion KRW compared to the previous month.

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