Every year, it has become hard to find limited-time special deposit and savings promotions offering temporarily high interest aimed at the holiday season for Chuseok this year. The financial sector says it has no choice but to focus on risk management rather than aggressive deposit gathering due to recently tightened lending regulations and a deteriorating business environment, and the so-called "ye-teche tribe," who have used deposits and savings as their main investing tool, are showing interest in equity-linked products that can secure relatively higher interest.
According to the financial sector on the 5th, this year the banking sector has virtually no Chuseok special promotions that offer high interest. Even during 4th Chuseok holiday, Shinhan Bank sold "Cheongnyeon Cheoeum Savings," which offered up to 8% annually, and Shinhan Bank sold "Anytime Savings," which offered up to 7.7% annually. Savings banks, which had released many higher-rate products compared with commercial banks, also did not roll out special promotions. Even early this year, products such as Welcome Savings Bank's "WelBang Like-it Savings (up to 14% annually)," Accuon Savings Bank's "Day-by-Day Savings (12% annually)," and OK Savings Bank's "OK Quit-Smoking Savings (9.6% annually)" were popular.
By contrast, looking at the financial sector's events aimed at this year's Chuseok, it is hard to call them so-called "혜자." In particular, most focus on preferential foreign exchange benefits targeting travelers going overseas during the long Chuseok holiday. For example, exchanging above a certain amount at the bank provides exchange-rate perks, mobile gift certificates, or preferential rates. This targets the recent trend that currency exchange via travel cards has increased sharply compared with exchanging through banks.
Holidays are typically when the financial sector rolls out high-interest special promotions to attract temporary deposit funds. This is to expand the scale of deposit funds in the short term and secure flexibility in fund management. However, with the impact of recent real estate lending regulations placing limits on loan expansion, the financial sector finds the current scale of deposits sufficient and has no need to raise liquidity excessively. In the case of savings banks, financial authorities have demanded since early this year a reduction in bad debts from real estate project financing (PF) in the savings bank sector, with a major focus on soundness management.
Given this situation, among the ye-teche tribe there is talk that "there is nowhere to put money to work." Banks have slightly raised time deposit rates following the recent rise in market rates, but they still do not reach even 3%. The average rate for 12-month time deposits at commercial banks is around 2.5–2.55%. The average deposit rates in the secondary financial sector, which had touted the advantage of higher rates than commercial banks, have also fallen below 3%: ▲ savings banks (2.99%) ▲ credit unions (2.83%) ▲ Saemaul Geumgo (2.8%) ▲ mutual finance (2.64%).
Members of the ye-teche tribe are showing interest in hybrid deposits that can benefit from a stock market boom, such as equity-linked deposits (ELD) and equity-linked bonds (ELB), which allow them to secure relatively higher rates within the banking sector. Through last month, sales of ELDs and ELBs at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup Bank) surpassed 10 trillion won. Compared with the roughly 11 trillion won sold last year, the pace is remarkable.
Equity-linked products pay interest while securing principal (or part of it) and reflecting part of the Korea Composite Stock Price Index (KOSPI) gains. Generally, additional returns can be expected when stocks rise, and with the recent stock market boom, banks are actively selling them. However, investors should note that while ELDs are covered by deposit insurance, ELBs are not, and if conditions such as stock price appreciation are not met, the return may be no different from general deposits.