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 combined balance of time deposits at the five major commercial banks in South Korea (KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank) has surpassed 1,000 trillion won. This "reverse money move" phenomenon—where funds are shifting back to safer assets like bank time deposits—is being attributed to increased volatility in the stock market, which has dampened investment enthusiasm, and to rising deposit interest rates at the major banks.

According to the financial sector on August 31, as of August 27, the balance of time deposits at the five major commercial banks stood at 1,000.9647 trillion won, up by 16.0248 trillion won from the previous month's end (984.9399 trillion won). After surpassing the 1,000 trillion won mark for the first time ever on August 21 (1,000.0917 trillion won) and then briefly falling back below the threshold, the balance again crossed the 1,000 trillion won mark in just six days.

The sharp growth trend in the Korean stock market has slowed, with frequent swings dampening investors’ appetite for the stock market and leading more capital into time deposits. In fact, the balance of time deposits at the five major commercial banks at the end of June was 949.3998 trillion won, which was an increase of 10.1135 trillion won compared to the end of last year (939.2863 trillion won). However, since July, the balance of time deposits has climbed rapidly, rising by 51.5649 trillion won in just two months. Meanwhile, investor deposits held at brokerages have fallen sharply. According to the Korea Financial Investment Association, investor deposits decreased by 24.9309 trillion won (down 20.5%) from 121.6339 trillion won as of June 30 to 96.7090 trillion won as of August 27. Compared to the recent peak on June 4 (139.6948 trillion won), it represents a decrease of 42.9858 trillion won.

The Bank of Korea’s back-to-back policy rate hikes are also cited as a factor accelerating this movement into deposits. The key time deposit 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% this month. For foreign banks, SC First Bank Korea’s e-Green Save Deposit offers a base rate of 3.65% per annum and up to 3.85%, nearing 4%. With the Bank of Korea raising its base rate by 0.25 percentage points on August 27, from 2.75% to 3.00%, there is growing expectation of further increases in deposit rates at banks.

An industry insider stated, “After the sharp rise in Korea's stock market last year, the market has turned downward in the second half and has not recovered its peak, with continued volatility increasing uncertainty. By contrast, as deposit rates for safe assets like time deposits have also risen compared to the past, more people feel inclined to shift their funds to bank deposits.”

Investment sentiment for gold is also on the rise. After hitting a peak of 5,600 dollars per ounce at the end of January this year, gold prices dropped to below 4,000 dollars last month, but have recently rebounded to around 4,400 dollars. The gold banking balances at KB Kookmin, Shinhan, and Woori Bank declined from 2.4434 trillion won at the end of January to 1.7159 trillion won at the end of last month, but increased by 120.4 billion won (7.0%) to 1.8363 trillion won as of August 27. Gold bar sales at the five major banks also rose from 31.444 billion won last month to 31.927 billion won as of August 27, an increase of about 1.5%.

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