Office worker Kim (55) withdrew all his money from the time deposit account, which matured a year after he enrolled, and moved it to a securities account. This decision was made because the interest rate had plummeted to around 2% annually. Kim said, "I invested 300 million won in a one-year time deposit at an interest rate of 4% last year and received 10 million won in interest, but with the rate dropping so low, I deemed that deposit investment (deposits + financial investment) to be meaningless," adding, "I am considering investing in bonds."
As the deposit interest rate has fallen to around 2%, those engaged in deposit investment are leaving banks. The balance of time deposits at the five major commercial banks has decreased by nearly 26 trillion won in just the past two months.
According to the financial sector on the 5th, the balance of time deposits at the five major commercial banks was 922 trillion 2998 billion won at the end of January, a decrease of 4 trillion 7918 billion won in one month. The balance of time deposits had been on the rise for seven consecutive months since May of last year but reversed to a decline in December. In December alone, the balance of time deposits dropped by 21 trillion 1285 billion won.
This is due to the drop in bank deposit interest rates to around 2%. According to the Korea Federation of Banks, the basic interest rate for one-year maturity time deposits at the five major banks averages 2.7% annually. The average interest rate for one-year bank bonds (unsecured, AAA), which serves as the standard for determining deposit interest rates, was recorded at 2.852% as of the 3rd.
The maturity of deposits is mainly concentrated at the end and beginning of the year. While December saw a strong wait-and-see stance for investment opportunities, January has shown signs of a full-fledged 'money move.' The waiting deposit fund, known as 'demand deposits,' increased by approximately 23.5 trillion won in December, but in January, it decreased by 3 trillion won. Demand deposits allow for deposits and withdrawals at any time, with an interest rate of around 0.1%. The simultaneous reduction in demand deposits and the balance of time deposits suggests a high likelihood that the money has been invested in other assets instead of being deposited in bank savings products.
The money that has left the banks is flowing into the stock market and the virtual asset market. According to the Korea Financial Investment Association, as of the 3rd, the investor deposit amount was 58 trillion 2317 billion won, an increase of about 7 trillion won in just over two weeks. Just on the 17th of last month, the investor deposit was 51 trillion 2701 billion won. The investor deposit refers to the funds that investors set aside in their securities accounts to purchase stocks. Despite heightened volatility in the virtual asset market due to fears of a 'tariff war' originating from the United States, trading is still actively taking place. As of the 3rd, the daily trading volume on domestic virtual asset exchanges amounted to 25 trillion won, surpassing the daily trading volume in the securities and KOSDAQ markets (18 trillion 7681 billion won).
An official from a commercial bank noted, "If the Bank of Korea lowers the key interest rate further this month, the decline in market interest rates is likely to steepen, and the basic deposit interest rate is expected to fall to the mid-2% range. As we have officially entered a phase of interest rate cuts, it seems that the money move will continue for the time being."