16 trillion won flows into bank fixed-term deposits in two weeks as market rates rise

South Korean banks have seen a significant influx of funds into fixed-term deposits, with savings totaling 965.3 trillion won across the five major banks (Kookmin, Shinhan, Hana, Woori, Nonghyup) as of July 15. This represents an increase of 15.9 trillion won since the end of June.

This surge is the largest monthly jump in fixed-term deposits in over a year, following an 18.4 trillion won increase in May of the previous year. If the trend continues, the total increase for July could be the highest since October 2022, when deposits grew by 47.7 trillion won.

The rise in fixed-term deposits is directly linked to increasing market interest rates, which have prompted banks to offer higher yields on their savings products. This has made traditional savings accounts more attractive to consumers looking for better returns on their money.

In contrast, money market deposit accounts (MMDAs), which offer lower interest rates but allow for easy access to funds, experienced a significant outflow. Their combined balance decreased by 17.8 trillion won to 130.7 trillion won during the same period. This marks the largest decline recorded since January 2019, indicating a clear shift of 'waiting' capital from easily accessible accounts to more lucrative fixed-term options.

Currently, the highest annual interest rate for a one-year fixed-term deposit at the five major banks ranges from 2.9% to 3.3%. Shinhan Bank, for example, is offering a promotional rate of up to 3.3% for its 'Shinhan My Plus Fixed Deposit' until the end of July, capped at 1 trillion won. Other banks, like Woori Bank, have also recently increased their deposit rates by 0.25 to 0.30 percentage points.