Deposit Rates Nearing 4%... Will "Ye-Tech" Investors Return Amid Roller-Coaster Stock Market? [Real Asset Strategies]

Increased Stock Market Volatility and Rate Hike Environment
Rising Concerns Among Individual Investors
Tier-1 Bank Deposit Rate Ceiling Reaches 3.75%
Savings Bank Parking Account Rates Also in the 3% Range
Further Rate Increases Possib

As the domestic stock market continues its roller-coaster ride with increasing volatility, individual investors are becoming increasingly concerned. Amidst this, banks have responded to rising market interest rates by collectively raising the upper limits on deposit rates. With the Bank of Korea also sending signals of a benchmark interest rate hike, the environment is already set for further rate increases within the year. The calculation for “Ye-tech” (deposit + asset management) investors, who had moved funds to the stock market during the KOSPI rally, has also become more complicated.

Will First-Tier Banks Reach 4% Annual Rates? ... Upper Limit Rises to 3.75%

On July 1, data disclosed by the Korea Federation of Banks shows that the average interest rate (highest rate, one-year maturity) for 35 time deposit products across 19 banks nationwide stands at 3.18% per annum. There are 21 products—accounting for 60% of the total—offering top rates exceeding 3% per annum. Even without preferential rates, 12 products have a base rate above 3% per annum.

The highest upper limit is SC First Bank’s “e-Green Save Deposit,” which offers up to 3.75% per annum. The base rate is 3.45%, and new customers who deposit funds through an SC First Bank account can receive an additional preferential rate of 0.3 percentage points. On June 17, SC First Bank raised the base rate for this product from 3.35% to 3.45%. From today, the base rate for the First Time Deposit (one-year maturity) also rises from 2.55% to 3.0%.

Banks raised deposit rates across the board in May and June, resulting in higher upper limits. All of the top five time deposit products with the highest rates disclosed by the Korea Federation of Banks increased their rates during this period. Jeonbuk Bank (JB Direct Deposit Account) raised its base rate by 0.26 percentage points on June 5, while Sh Suhyup Bank (Hey Time Deposit · 3.4%) increased its rate by 0.1 percentage points on June 24. Internet banks such as K Bank and KakaoBank also raised their time deposit rates at the end of May, offering rates in the range of 3.4%–3.41% per annum.

The background for the banks’ deposit rate hikes is the rise in market interest rates. According to the Korea Financial Investment Association, the interest rate on one-year bank bonds (AAA) rose from 3.182% in early April to 3.724% on June 29. This is an increase of more than 0.5 percentage points in three months. This rise has been driven by concerns about inflation due to the prolonged Middle East conflict and rising oil prices, as well as the possibility of a second-half benchmark rate hike by the Bank of Korea, all of which pushed up government bond rates and, in turn, bank bond rates.

For savings banks, the highest rate on time deposits (one-year maturity) has reached 4.56% (Yuanta Savings Bank), with the average climbing to 3.78%. This is the highest level since January 2024. Compared to the 3.18% level at the end of March, rates have jumped by 0.6 percentage points in just three months. While this is partly a response to rising market rates, it also appears that savings banks are aggressively raising rates to prevent capital outflows to the stock market.

Savings Bank Parking Account Rates Also in the 3% Range ... Where Will Stock Market Sideline Funds Go?

With growing sentiment to take a wait-and-see approach amid stock market instability, there is increasing interest in where sideline funds will flow.

At domestic banks, there are quite a few products offering 3% per annum rates for just a three-month deposit. Sh Suhyup Bank offers the highest at 3.4% per annum, while internet banks are also applying rates of 3.0%–3.2% per annum. Among savings banks with large asset sizes, OK Savings Bank and SBI Savings Bank are offering 4.0% and 3.8% per annum, respectively.

Savings bank parking account products are also worth noting. Parking accounts offer higher interest than ordinary demand deposit accounts even for just a one-day deposit, and with free withdrawals and deposits, they are less restrictive than time deposits. Currently, major savings bank parking account products offer rates ranging from the high 2% range to the 3% range. For example, at Aequon Savings Bank, the rate is 3.5% per annum, with interest paid quarterly. OK Savings Bank’s “OK Parking Flex Account” offers 3.01% per annum for amounts up to 5 million won, and 2.4% per annum for amounts above 5 million won up to 300 million won. SBI Savings Bank recently increased the interest rate on its “Cider Demand Deposit Account” from 2.0% to 2.7%.

The interest rates on CMA (Cash Management Account) products, which are securities firm demand deposit products, are also competitive. Mirae Asset Securities’ “CMA-RP Naver Account” offers 2.5% per annum, while Korea Investment & Securities’ CMA promissory note-type product offers 2.4% per annum. However, it should be noted that CMAs are not covered by deposit insurance.

A Benchmark Rate Hike Within the Year Appears Certain ... Deposit Rates May Rise With a Time Lag

If the Bank of Korea raises the benchmark rate in July, there is a possibility that deposit and other savings rates will increase further with a time lag. When the benchmark rate rises, it pushes up market rates; in this situation, as the cost of raising funds through bank bonds increases, banks may opt to raise deposit rates to attract more deposits. There is also a high likelihood that deposit rates will rise to prevent funds from flowing to other financial products linked to market rates.

However, a variable is that the Bank of Korea has repeatedly hinted at the possibility of rate hikes, and these expectations have already been largely reflected in market interest rates. Deposit rates are more sensitive to market rates than to the benchmark rate. Therefore, even if the Bank of Korea raises the benchmark rate in July, if market rates do not respond, banks’ strategies could change. A banking industry official said, "It is true that signals of a benchmark rate hike and the resulting rise in market interest rates have created an environment for banks to raise deposit rates," but added, "Unlike lending rates, which are directly linked to market rates, deposit rate increases are also subject to banks’ strategic decisions, so the timing of any increase will depend on future market movements."

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