South Korean Banks Boost Deposit Rates Amidst Shift to Stock Investments
South Korean banks are responding to a surge in investment into the stock market by increasing deposit rates, aiming to retain customers and attract novel funds. This move comes as investors increasingly favor equities, prompting banks to bolster their deposit offerings.
The Rise of ‘Money Move’ and Bank Responses
This year has seen a significant “money move” – a large-scale shift of capital – into the stock market. To counter this outflow, both internet-based and traditional banks have been adjusting their deposit rates upwards. For example, Hana Bank increased the interest rate on its ‘Hana’ fixed deposit for a 1-year term from 2.85% to 2.90% on March 3rd. K Bank followed suit on March 7th, raising the rate on its ‘Code K’ fixed deposit (1-year term) from 2.96% to 3.01%, with adjustments also made to 1-month and 3-month terms.
Current Deposit Rate Landscape
As of yesterday, the average 1-year fixed deposit rate across the five major banks – KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup – stands at 2.89%, a 0.06 percentage point increase from the previous month. Rates have moved from a range of 2.8% to 2.85% a month ago to between 2.8% and 2.95% as of March 10th.
Internet and Regional Banks Lead the Way
Internet-based banks and regional banks are offering even more competitive rates, with some exceeding 3%. K Bank’s ‘Code K’ deposit currently offers 3.01%, while KakaoBank provides a 3.00% rate on its fixed deposits. Several regional banks are also offering rates above 3% for 1-year terms, including Jeonbuk Bank (3.15%), Gwangju Bank (3.02%), Kyungnam Bank (3.00%), and Busan Bank (3.00%).
Factors Driving Rate Increases
Banks are increasing deposit rates not only due to rising bond yields but also to prevent capital from flowing to securities firms and other banks. This competitive pressure is driving the overall increase in deposit rates.
Savings Banks Join the Trend
Savings banks are also increasing deposit rates to attract customers. The average 1-year fixed deposit rate across all 79 savings banks in South Korea is currently 3.08%, showing a recovery from a dip to the mid-2% range in November of last year.
FAQ
Q: Why are banks increasing deposit rates?
A: Banks are increasing rates to attract and retain customers as more investors move their money into the stock market.
Q: Which banks offer the highest deposit rates?
A: Internet banks like K Bank and KakaoBank, along with regional banks such as Jeonbuk Bank and Gwangju Bank, currently offer some of the highest rates.
Q: What is the ‘money move’ phenomenon?
A: The ‘money move’ refers to the large-scale shift of capital from deposits into investments, particularly the stock market.
Q: Are savings bank rates competitive?
A: Yes, savings bank rates are currently competitive, with an average of 3.08% for 1-year fixed deposits.
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