'Yetech-jok' Is a Thing of the Past... New Fixed Deposit Sign-ups Halved

Citizens waiting in line to sign up for a special savings account with an annual interest rate of 10% in front of Gwanak Credit Union in Seoul last October. Photo by Yonhap News

As deposit interest rates at major banks enter a downward trend, the number of Yetech (savings + investment) enthusiasts is disappearing.

According to the financial sector on the 10th, the total amount of new fixed deposit subscriptions at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) as of the end of last month was 38.3958 trillion won. This is a 53% decrease compared to the peak of new subscriptions by Yetech enthusiasts at the end of October last year (81.9735 trillion won). The number of subscriptions in March also dropped by 56% to 790,365 from the peak of 1,802,324.

The amount and number of early terminations of fixed deposits also sharply declined. The frequent switching of fixed deposits by Yetech enthusiasts to get even a 1 percentage point higher interest rate has slowed down. The number of early termination cases decreased by 76%, from 748,443 to 180,365. The amount of early terminations of fixed deposits at the five major banks fell by 78%, from 32.1226 trillion won in October last year to 6.9095 trillion won at the end of last month.

The balance of fixed deposits also turned to a decline at the end of last month. Fixed deposits at the five major banks amounted to 805.3384 trillion won, down 10.3622 trillion won from the previous month, and regular savings deposits also decreased by 2.312 billion won to 37.0908 trillion won compared to the previous month. The total deposit balance was 1,871.537 trillion won, down 18.2675 trillion won from the previous month (1,889.8045 trillion won).

The sharp decline in new fixed deposit subscriptions and early terminations is due to the falling deposit interest rates at commercial banks. The one-year fixed deposit interest rate at commercial banks, which surged from the high 4% range at the end of October last year to the low 5% range in early November, has recently plummeted repeatedly, falling to the level of the Bank of Korea’s base rate (3.50%) and even below the base rate at the lower end. According to the Korea Federation of Banks, the interest rates for representative fixed deposit products (one-year maturity, as of the 6th) at the five major banks are around 3.4% to 3.53%.

In the second half of last year, the bond market tightened, leading to fierce competition among financial institutions to attract deposits. However, after financial authorities urged restraint on raising deposit interest rates, competition eased, and banks resumed issuing bank bonds for refinancing purposes, removing incentives to raise deposit rates.

On the other hand, demand deposits, which are considered standby funds, are increasing. Demand deposits at the five major banks reached 598.2682 trillion won at the end of last month, up 8.5435 trillion won from the previous month. This is interpreted as funds being accumulated while watching the rebound in the stock and real estate markets. There is also a trend of looking into alternative investment areas instead of deposits. A representative from a commercial bank said, "As fixed deposit interest rates fall, customers who previously invested in deposits are now looking into equity-linked securities (ELS) or electronic short-term bonds."

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