"I Can't Take the KOSPI Anymore" as Investors Flee, Banks Say "Now's the Time" to Attract Funds

Banks raise deposit rates repeatedly in the second half
Special offers with rates of up to 4% also hit the market
Securities firms seek to retain customers with high-interest short-term notes

Banks have stepped up competition to attract funds flowing out of a volatile stock market. They are vying for customers' attention with special deposit offers featuring annual rates of up to 4%. Securities firms, meanwhile, are seeking to retain customers with special high-interest-rate promissory note offerings.

According to the Korea Financial Investment Association, investor deposits—funds awaiting investment in the stock market—fell from KRW 121 trillion 634 billion at the end of June to KRW 97 trillion 428 billion on October 14. Over the same period, the KOSPI plunged from 8,476.48 to 6,008.81, based on closing prices.

Banks have recently been raising deposit rates one after another. Along with the impact of consecutive policy rate hikes in July and August, they appear to be stepping up competition to attract funds shifted by the recent stock market correction.

Shinhan Bank raised the rate on its SOL Easy Fixed Deposit (12-month maturity) by 0.30 percentage points on July 21, followed by increases of 0.20 percentage points on September 9 and 0.10 percentage points on September 30. The rate, which stood at 2.90% on May 27, reached 3.50% on September 30. Hana Bank also raised the rate on its Hana One Fixed Deposit (12-month maturity) by 0.30 percentage points on July 23, 0.10 percentage points on September 10, another 0.10 percentage points on September 22, and 0.20 percentage points on October 1. Woori Bank raised the rate on its WON Plus Deposit (12-month maturity) by 0.30 percentage points on July 20, another 0.30 percentage points at the end of September, and 0.10 percentage points on October 7. KB Kookmin Bank and NH Nonghyup Bank are in a similar position. Deposit rates, which were in the 2% range in the first half of the year, have risen to the mid-3% range in the second half.

Special high-interest-rate offers are also continuing to emerge. Shinhan Bank launched its Super SOL Welcome Fixed Deposit on October 6. The base rate for the one-year product is 3.6% per year, and customers who meet the required conditions can earn up to 4% per year. NH Nonghyup Bank has launched its NH All One Bank 10th Anniversary Deposit, which offers a top rate of 3.9% per year.

Against this backdrop, fixed-term deposit balances are on the rise. As of October 14, the combined fixed-term deposit balance at five banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood at KRW 1 quadrillion 16 trillion 522.9 billion. Compared with KRW 949 trillion 399.8 billion at the end of June, this means KRW 67 trillion 123.1 billion flowed into fixed-term deposits in just three and a half months.

"In the first half of the year, we saw what was known as a 'money move,' with funds shifting from banks to the stock market. Now banks are competing to capture a 'reverse money move,'" a commercial bank official said. "As the amount of money leaving the stock market grows, more products aimed at attracting those funds are likely to be launched."

Securities firms, by contrast, are mounting a defense with special promissory note offerings carrying annual rates in the 4% to 5% range. Promissory notes are short-term financial products with maturities of up to one year that securities firms designated as super-large investment banks (IBs), with equity capital of at least KRW 4 trillion, can issue on their own credit. Kiwoom Securities launched a special promissory note offering this month with a three-month maturity and an annual rate of 5.80%. Samsung Securities began selling one-year promissory notes carrying an annual rate of 4.3% on October 12. "Promissory notes are classified as safe assets among securities firm products, so we believe they are competitive enough to attract funds that would otherwise go into bank deposits," a securities firm official said.

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