Rising Dollar Balances and Increasing MMDA... 'Corporate Deposit' Money Move Pauses

Analysis of Corporate Deposit Trends at the Five Major Banks from January to September

Companies Flush with Cash: Dollar Deposits Rise for Six Straight Months
Won Deposits Also Remain at Record Highs This Year
Short-term Funds Shifted to Time

This year, with export figures continuing to break all-time records, the deposit balances of companies have also surged significantly. Dollar deposits have increased for six consecutive months, reaching their highest level ever, while KRW-denominated deposits have remained above last year’s scale. The rapid flow of funds into time deposits, which accelerated as the interest rate hike cycle began, appears to have paused this month. However, as domestic banks are once again raising time deposit rates, there is still potential for further movement.

Corporate Dollar Deposits Stay in the 60 Billion Dollar Range for Two Consecutive Months... Nearly 10 Billion Dollar Increase This Year

According to financial industry sources on September 23, the balance of corporate dollar deposits at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup) stood at $62,239.92 million as of the 17th, an increase of $1,298.06 million compared to the end of last month. Although the increase was smaller than the record jump in August ($6,440.75 million), balances have grown for a sixth straight month since April.

As of the 17th, the corporate dollar deposit balance was the highest since monthly statistics for the five major banks began in May 2021. Compared to the end of last year, balances have grown by $9,823.49 million over roughly nine months, bringing the annual increase close to $10 billion. Considering that last year’s annual increase was just over $1.2 billion, the amount of corporate dollars has expanded rapidly this year.

Industry analysts attribute this to a combination of exchange rate trends and robust exports. In the first half of this year, with the KRW-USD exchange rate soaring to around 1,500 won per dollar, export companies did not actively convert their dollars to won. After the rate dropped to the 1,300 won range in July, many companies delayed currency conversion. On top of that, as export figures exceeded $90 billion for three consecutive months—setting new records—the amount of dollars earned by companies also rose sharply. Importers, anticipating future payments, also increased their dollar deposits by securing funds in advance at the lower exchange rate, contributing to the increase in balances.

Korean won-denominated corporate deposits, including demand deposit accounts (MMDAs) and time deposits, have also risen sharply this year. The balance of corporate time deposits reached 564.5804 trillion won, up 75.7919 trillion won from the end of last year, marking an all-time high. MMDA, a short-term account type, maintained a scale exceeding 100 trillion won for eight months this year, except for January. A financial industry representative commented, "Compared to last year, both corporate dollar and KRW deposits have increased in overall size."

Short-Term Funds → Time Deposits Movement Slows This Month... MMDA Registers First Increase in Four Months

This month, the rapid flow of funds (money move) into time deposits, which accelerated with the benchmark rate hikes, appears to have eased somewhat.

As of September 17, corporate MMDA balances stood at 111.7864 trillion won, an increase of 6.961 trillion won from the end of the previous month—returning to growth for the first time in four months. In contrast, time deposits increased by only 4.6421 trillion won over the same period.

MMDA, often referred to as a ‘corporate parking account,’ allows free withdrawals and deposits, but offers a base interest rate in the 0% range. By comparison, following the benchmark interest rate hikes, time deposit rates have climbed to the upper 2% to low 3% per annum. As a result, from June to August, time deposits saw inflows of 61.2344 trillion won, while MMDA accounts experienced outflows totaling 29.2652 trillion won, reflecting very active fund movement. As export success allowed companies to build up excess cash, many responded to rising interest rates by transferring short-term idle funds into time deposits.

The slowdown in money movement this month is attributed to companies having already shifted funds in anticipation of higher time deposit rates and now pausing to observe the future direction of the benchmark and deposit rates.

Nonetheless, as Hana Bank followed KB Kookmin Bank and Woori Bank in raising time deposit rates again recently, the tide of fund movement could become active once more. Earlier this month, all five major banks raised their deposit rates, and in just over ten days, KB Kookmin Bank, Woori Bank, and Hana Bank again raised time deposit rates to the 3.4–3.5% per annum range between September 21 and 22.

A banking industry official stated, "Market interest rates are rising due to policy rate hikes in Korea and the United States, and the need for stable funding is growing, leading to adjustments in deposit product interest rates. It is likely that the upward trend in deposit rates will continue for the time being."

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