Savings banks have strengthened their products by launching new high-interest deposit products called "parking accounts" or by raising interest rates. Starting in September, the deposit protection limit will be raised from 50 million won to 100 million won to attract customers from commercial banks by increasing interest rates.
According to the savings bank industry on the 11th, Welcome Savings Bank launched a "foreigners all-in-one account" for foreign users at the beginning of this month. An interest rate of 3% per annum applies to deposits under 3 million won, while an interest rate of 0.5% per annum applies to amounts exceeding 3 million won. SBI Savings Bank has resumed selling its "Cider Bank Coffee Savings" parking account product from this month. With a condition of depositing 100,000 won each month for six months, the product offers an effective interest rate of around 15%, including interest and coffee coupon benefits. At the end of last month, JT Shin-ae Savings Bank announced it would raise the interest rate on its "Plus Deposit Account" for amounts under 100 million won to 2.9% per annum, up from a uniform rate of 2.7% for amounts up to 300 million won.
"Parking accounts" are short-term deposit accounts used for briefly holding funds, akin to "parking a car temporarily." They allow for deposits and withdrawals, while typically offering higher interest rates than ordinary accounts. Unlike fixed deposits that require a set term, a parking account applies the agreed interest rate even if funds are deposited for just one day, allowing for liquidity while benefiting from interest.
Typically, savings banks secure over 90% of their total deposits through time deposits, meaning they don't greatly increase deposits through ordinary deposit accounts like parking accounts. However, as there is no agreed term for these products, they have a high short-term demand, providing the advantage of being able to quickly increase levels of deposits over a short period.
Despite a trend of declining base interest rates, savings banks are gradually increasing the average interest rate for time deposits to around 3%. As of the end of May, the deposit balance in savings banks was 98.53 trillion won, increasing by 137.4 billion won compared to the previous month, rebounding from a six-month consecutive decline that started last November.
This is because the delinquency rate, which had increased due to problematic real estate project financing, is gradually improving. The delinquency rate for savings banks in the first quarter was 9%, up 0.48 percentage points from the end of last year (8.52%), marking the highest level in 10 years. Following this, through the cleanup of non-performing loans amounting to 1.4 trillion won in the first half of this year, the delinquency rate fell to the 7% range in the second quarter.
As the outlook improves and funding inflows are expected, the savings bank market is gradually showing signs of recovery. NICE Investors Service has analyzed that, with the increase in the deposit protection limit next month, a flow of funds from commercial banks to savings banks is anticipated. Customers who had previously dispersed assets in deposits of 50 million won for the sake of deposit protection can now be protected for amounts up to 100 million won, allowing them to deposit more funds into savings banks.
Large savings banks are expected to launch high-interest parking accounts to increase deposits, while mid- to low-tier savings banks are predicted to competitively introduce products to prevent funds from fleeing to higher-tier firms.
A representative from a savings bank noted, "When the deposit protection limit is raised in September, the competition for securing deposits among savings banks will become more active than before," adding, "This is also the reason why the deposits in savings banks have rebounded, even though the business conditions remain poor."