Era of 1,000 Trillion Won in Time Deposits at Top 5 Banks... Gold Investment Sentiment Also Rebounds

Flow of Funds Moves from Stock Market to Bank Deposits
Driven by Stock Market Uncertainty and Interest Rate Hikes

The balance of time deposits at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup Bank) has surpassed 1,000 trillion won. A combination of heightened volatility in the stock market and rising deposit interest rates at commercial banks has led to an increased preference for safe assets such as time deposits, resulting in a 'reverse money move' phenomenon.

According to the financial sector on August 31, as of August 27, the balance of time deposits at the five major commercial banks reached 1,000.9647 trillion won, up by 16.0248 trillion won from the end of last month (984.9399 trillion won). On August 21, the balance surpassed 1,000 trillion won for the first time at 1,000.0917 trillion won, then briefly fell back to the 990 trillion won range, before exceeding 1,000 trillion won again after six days.

The sharp growth trend in the Korean stock market has slowed down, with drastic ups and downs, leading to waning investor interest in equities and a corresponding flow of funds toward time deposits. In fact, as of the end of June, the combined time deposit balance at the five major commercial banks was 949.3998 trillion won, up 10.1135 trillion won from the end of last year (939.2863 trillion won). However, from July, the time deposit balance has surged, rising by 51.5649 trillion won over just two months. In contrast, investor deposits held at securities firms have fallen sharply. According to the Korea Financial Investment Association, investor deposits dropped from 121.6339 trillion won on June 30 to 96.7090 trillion won as of August 27—a decrease of 24.9309 trillion won, or 20.5%. Compared to the peak of 139.6948 trillion won on June 4, it represents a drop of 42.9858 trillion won.

The Bank of Korea raising the base interest rate for two consecutive months is also cited as a factor boosting demand for time deposits. The representative time deposit interest rates at the five major banks have risen from 2.9–2.95% per annum at the end of June to 3.2–3.25% per annum currently. At SC First Bank, a foreign bank, its e-Green Save Deposit now offers a base rate of 3.65% per annum and a maximum of 3.85% per annum—nearly reaching the 4% threshold. With the Bank of Korea raising the base rate by 0.25 percentage points from 2.75% to 3.00% on August 27, the likelihood of banks further raising deposit rates has increased.

A financial industry source stated, "After surging sharply since the second half of last year, the domestic stock market has declined in the second half and has been unable to recover its previous highs, repeatedly experiencing fluctuations and increased instability," adding, "On the other hand, interest rates on safe assets like time deposits are higher than in the past, strengthening the incentive to move funds into bank deposits."

There are also signs of revived interest in gold investment. The price of gold, which soared to $5,600 per ounce at the end of January this year, fell to below $4,000 last month, but has recently recovered to around $4,400. The gold banking balances at KB Kookmin, Shinhan, and Woori Bank fell from 2.4434 trillion won at the end of January to 1.7159 trillion won at the end of last month, but rebounded to 1.8363 trillion won as of August 27—an increase of 120.4 billion won, or 7.0%, this month. Additionally, gold bar sales at the five major banks rose from a total of 31.444 billion won last month to 31.927 billion won as of August 27, with an increase of about 1.5%.

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