As of Sept. 1, the protection limit for deposits will be raised to 100 million won, but it has been determined that the anticipated large-scale movement of funds has not yet occurred.
The Financial Services Commission held a meeting on the preparation for the implementation of the raised deposit protection limit with the Financial Supervisory Service, the Bank of Korea, the Korea Deposit Insurance Corporation (KDIC), and the Korea Federation of Banks on the 18th, noting, "As a result of monitoring deposits and interest rates since the ordinance for raising the deposit protection limit was announced on May 16, it has been assessed that there were no significant trends in fund movement as of the end of last month." It added, "Deposits in banks, savings banks, and mutual finance are all increasing to levels similar to previous years," and stated, "The anticipated movement of funds from banks to the secondary financial sector or the concentration of funds from small and medium-sized savings banks to large savings banks does not appear to be evident so far."
Financial authorities have determined that while deposits in savings banks have switched to an upward trend since the announcement of the legislative proposal, they are still at a lower level than at the end of last year, and therefore there is no problem. Additionally, as deposits in small and medium-sized savings banks and large savings banks have increased evenly, the concentration of funds in large savings banks is not at a level of concern.
According to the Financial Services Commission, on May 16, when the announcement for raising the deposit protection limit was made, the total deposits in banks were 2,227.7 trillion won, which increased by 2.1% to 2,270.4 trillion won by the end of last month. During the same period, savings banks increased from 98.2 trillion won to 100.9 trillion won, and the mutual finance sector increased from 921.6 trillion won to 928.7 trillion won, growing by 2.8% and 0.8%, respectively.
The financial authorities have determined that since both the interest rates of banks, savings banks, and mutual finance have fallen to levels similar to the current year's standard interest rate reduction of 0.5%, there is no high-interest special promotional competition to attract funds. However, the number of high-interest special promotional products in savings banks and mutual finance is increasing, warranting continuous monitoring.
The average interest rate for one-year fixed deposits at banks fell by 0.16 percentage points from 2.64% at the time of the legislative announcement to 2.48% on the 1st. During the same period, the interest rates for savings banks dropped from 3.06% to 3.04%, and mutual finance rates fell from 2.97% to 2.72%. The standard interest rate decreased from 2.75% to 2.5%, a drop of 0.25 percentage points.
The Financial Services Commission called on related institutions attending the meeting to make thorough preparations for the implementation of regulations, including monitoring the movement of funds and customer guidance. The Financial Services Commission plans to closely examine deposits and interest rates for deposits concentrated in the fourth quarter through a standing task force.