With the era of a 2% benchmark interest rate opening, the speed of "MoneyMove" is expected to accelerate even further. The turnover rate for demand deposits at domestic banks has already reached its highest level in five years, and with the drop in the benchmark interest rate, the possibility of funds moving away from banks in search of higher revenue is increasing.
According to data from the Bank of Korea's Economic Statistics System on the 25th, the turnover rate for demand deposits at domestic banks in the fourth quarter of last year was 18.8 times, marking the highest level in five years since it recorded 19.2 times in the fourth quarter of 2019. A high turnover rate of deposits indicates active withdrawals of funds for investment or consumption.
Demand deposits refer to short-term funds that can be withdrawn at any time, unlike savings deposits. The rise in the turnover rate of demand deposits is influenced by the reduction in benchmark interest rates; as the rates have begun to decrease, banks have lowered interest rates on deposits, leading to a movement of funds in search of higher revenue.
On this day, KB Kookmin Bank lowered the highest interest rate (based on a one-year maturity, including preferential rates) for its representative deposit product, "KB Star Time Deposits," from the previous 3.00% to 2.95%. Shinhan Bank also reduced the highest interest rate (based on a one-year maturity, including preferential rates) on its representative deposit product, "Solleun Easy Time Deposits," from 3.00% to 2.95% on the 20th. The 3% interest rate has disappeared from regular bank time deposit products, and interest rates in the 2% range are becoming mainstream.
A source from a major bank noted, "Whether or not there will be a drop in the benchmark interest rate could impact bank bond rates, which in turn could lower deposit rates as well."
For this reason, the balances of demand deposits and savings deposits at major banks have been declining this year. The time deposits of the five largest domestic banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) decreased from 948 trillion won in November of last year to 922 trillion won in January of this year, a drop of nearly 26 trillion won. As of the 19th, the demand deposits of the five major banks were 590 trillion won, down 41 trillion won from 631 trillion won at the end of last year.
The funds that have moved out are going into gold or Bitcoin, among other alternatives. The gold investment product, the "ACE KRX Gold Spot" exchange-traded fund (ETF), surpassed 700 billion won for the first time on the 23rd of last month and attracted an additional 102.8 billion won in funds over four trading days, bringing its total to over 803.5 billion won. In January of this year, the deposits at the five major domestic virtual asset exchanges reached 10.6561 trillion won, an increase of 104.32% compared to one year ago (5.2154 trillion won).
Banks are under pressure to attract funds. Demand deposits can be raised at relatively low interest rates, which helps improve a bank's revenue. To attract more low-cost deposits, banks have begun active sales of services such as group savings accounts and partnerships with virtual asset trading platforms.
A banking official said, "Since the regular deposits of banks have been declining since December of last year, and demand deposits are generally decreasing, I understand that most banks are considering how to secure funds," adding, "As the benchmark interest rate is expected to drop further into the 2% range, the necessity for low-cost deposits is increasing for revenue protection."