[1mm Financial Talk] Savings Bank Depositors Miss High-Interest Opportunities Due to Malicious Rumors

'PF Loss Rumor' Welcom·OK Savings Bank
Some Customers Terminate High-Interest Special Products Early
Industry Advises "Do Not Rush to Cancel Based on Unverified Information"

Last month, some customers left Welcome Savings Bank and OK Savings Bank due to malicious rumors about a ‘large-scale deposit withdrawal (bank run),’ and among them were customers who had to feel disappointed for missing the opportunity to receive high interest rates.

According to the industry on the 5th, a portion of the deposit balances recently withdrew from Welcome Savings Bank and OK Savings Bank. On the 12th of last month, a text message circulated claiming that ‘there was a deficit of over 1 trillion won in real estate project financing (PF), so withdraw your deposits’ from these savings banks. Although it was soon revealed to be false, some customers canceled their deposits and savings accounts fearing a bank run.

Among these were high-interest special promotion products. When the base interest rate sharply rose in the second half of last year, savings banks competitively raised deposit interest rates to prevent funds from flowing to commercial banks. If these accounts were canceled early, customers could not receive all the contracted interest, resulting in a loss from the customer’s perspective (however, interest for the deposited period is paid). Even if they re-subscribe now, the interest rates have dropped in the meantime, so the benefits customers can receive are less than during the interest rate hike period. Because of this, it is known that some customers, realizing the text message was false, later requested the savings banks to retract the cancellation. Naturally, the cancellation retraction requests were not accepted, as the customers’ intentions were confirmed multiple times at the time of cancellation and they agreed.

Conversely, from the savings banks’ perspective, although the scale is small, they effectively reduced interest expenses. This is because the interest expenses that the savings bank industry had to bear increased significantly last year as they competitively offered high-interest special promotions. Also, right after the malicious rumors spread, many viewed the increase in deposit interest rates by these savings banks as an attempt to prevent customer outflow, but the industry sees it as a way to secure funds with the nature of reserve funds as the maturity of high-interest special promotion products approaches.

For now, savings banks urge customers not to hastily cancel deposits since deposit protection measures are in place. A savings bank official said, “Deposits are protected up to 50 million won by the Korea Deposit Insurance Corporation, and there are reserve funds from the Korea Federation of Savings Banks and company liquid assets, so the possibility of not getting deposits back is almost none,” adding, “When unverified information circulates, it is not too late to make a judgment after the truth is revealed.” Partial cancellation of savings bank deposits and savings is possible. For example, if 70 million won is deposited, customers can leave up to the deposit insurance limit of 50 million won and cancel only 20 million won.

[Image source=Yonhap News]

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