Despite Lower Interest Rates, Bank Deposits Surge: What’s Behind the Trend?
The amount of deposits continues to surge Recently, domestic banks in South Korea have been lowering their deposit interest rates, yet the amount of deposits continues to surge. This paradox occurs as depositors flock to secure higher interest rates, even though banks have essentially halted their competition for funds. However, this trend presents challenges for banks in balancing deposits and loans, and could eventually lead to unfavorable conditions for financial consumers. This year, domestic banks have continuously lowered their deposit interest rates, which are now barely at 3.5%. This rate is nearly the same as the Bank of Korea’s base rate, making it difficult for depositors to expect substantial returns on their investments. The lowering of rates indicates that banks have temporarily stepped back from the competition to attract funds. Nevertheless, despite these low rates, the total deposits in the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) have incr...