[1mm Financial Talk] The Temptation of High-Interest Special Offers... Investment Enthusiasts Checking Disclosures

SVB Crisis - Real Estate PF Raises Awareness Among Investment Enthusiasts... Cautious While Checking Disclosures

More and more savers and investors are approaching special promotional products offered by mutual financial institutions with caution. This is due to heightened awareness of bank runs following the Silicon Valley Bank (SVB) crisis in the United States, as well as growing anxiety stemming from rumors of a real estate project financing (PF) crisis, leading to a widespread mindset of "better safe than sorry."

According to the Bankers Association on the 13th, the interest rates for one-year fixed deposits at the five major domestic commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) were recorded at 3.37% to 3.50% based on the highest preferential rates. Excluding preferential rates, these rates are effectively below the Bank of Korea’s base rate of 3.50%.

The situation is similar for savings banks. According to the Korea Federation of Savings Banks, as of the previous day, the top interest rate for one-year fixed deposits was 4.5% (CK Savings Bank). This is a stark contrast to last November when commercial banks offered 5%, savings banks 6%, and mutual financial institutions even higher rates.

High-interest deposits exceeding 5% or special promotional products are still occasionally offered by mutual financial institutions such as regional agricultural and fisheries cooperatives, forestry cooperatives, credit unions, and Saemaeul Geumgo. According to the Bank of Korea, as of February, their average deposit interest rates ranged from 4.51% (mutual financial institutions) to 4.95% (Saemaeul Geumgo), which is higher compared to banks (3.54%) and savings banks (4.14%).

[Image source=Yonhap News]

However, savers and investors are showing caution. Unlike last year when they quickly moved funds even for a 0.1 percentage point difference in interest rates, recently more people have been carefully examining management disclosures, including indicators such as the institution’s BIS capital adequacy ratio, liquidity ratio, and non-performing loan ratio.

Office worker Park Jun-young (33) recently considered subscribing to a deposit product from Mutual Financial Institution A offering an annual interest rate of 5.7%, but ultimately chose a deposit product from Institution B offering a slightly lower rate of 5.4%. Although Institution B’s rate was a bit lower, Park judged it to be relatively safer in terms of management evaluation grade (Grade 1) and liquidity ratio.

Park said, “I’m not an expert in economics or finance, so I don’t fully understand all the detailed indicators in the management disclosures, but since Institution A has a management evaluation grade of 2 and a relatively low liquidity ratio, I decided to choose the relatively stable Institution B.”

The increased caution among savers and investors is due to the bank run incident at SVB and ongoing concerns about PF defaults amid the recent real estate market downturn. According to the interest rate comparison site MyBank, the top 1 to 30 financial products by interest rate are all from Saemaeul Geumgo in the Daegu region. Daegu is known as the region with the highest number of unsold houses nationwide, with about 13,900 units as of February. Among the top-ranking Saemaeul Geumgo, some are struggling to recover loans related to real estate group loans.

Recent circulating “strange rumors” in the market also contribute to consumers’ caution. Recently, baseless liquidity crisis rumors spread online about Toss Bank, which launched an advance interest deposit product. The day before, a suspicious text message circulated claiming that OK and Welcome Savings Banks would face payment suspension due to a 1 trillion won real estate PF default, prompting financial authorities to intervene.

A financial industry official said, “The financial industry is an industry where the ‘psychology’ of market participants is crucial. Even institutions and investors who fully understand the situation often react sensitively to minor risk factors or rumors when the market is unfavorable,” adding, “Rather than being unsettled by rumors, it is positive to carefully examine various indicators and make investment decisions accordingly.”

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