With the depositor protection limit rising to 100 million won from 50 million won on Sept. 1 for the first time in 24 years, a MoneyMove phenomenon—large sums shifting to the higher-interest secondary financial sector—was expected. But because the interest rate gap between banks and secondary institutions is not large, the MoneyMove phenomenon has yet to appear.
According to the office of Lee Heon-seung of the People Power Party on the National Policy Committee on the 20th, savings bank deposits stood at 105 trillion won at the end of September, up 2.6 trillion won in the month since the depositor protection limit was raised. That was a 2.6% increase from the end of the previous month. Looking at the average daily increase in deposits, the deposits, which rose by an average of 44.3 billion won per day in August, surged to 126.5 billion won from Sept. 1 to 7, the first week the higher limit took effect.
However, from the 8th to the 30th, the average fell back to the 70 billion won range per day. Deposits at savings banks had been rising gradually even before the higher limit took effect; they rose temporarily right after implementation but the pace slowed immediately. By deposit account category, time deposits, demand deposits, and other items (such as installment savings) all increased evenly, with nothing unusual.
Earlier, financial authorities said deposits in the secondary sector, especially savings banks, could increase by up to 25% when the higher protection limit took effect. Some feared cutthroat competition among savings banks. But a month after the higher limit, deposits have only continued to increase at a pace similar to before.
Despite the higher limit, savings banks are not engaging in conspicuous marketing or publicity. Even within the savings bank industry, expectations for expanding funding are not high; instead, there are concerns that expense burdens will grow due to higher deposit insurance premiums.
In particular, since late last year, financial authorities have been demanding arrears-rate management and soundness from savings banks, making it difficult for them to actively pursue business. Savings banks need to generate revenue (net interest margin) by deploying customer deposits into loans, but loan demand from corporations and individuals has declined amid the economic downturn and the impact of the Oct. 15 real estate measures.
Another problem is that in a broad rate-cut environment, interest rates on bank deposit products are not diverging much from those in the secondary sector. According to the Korea Federation of Savings Banks, as of last month, the average annual rate on 12-month time deposits at 79 savings banks was 2.81%. Considering that the top simple-interest rate on 12-month time deposits at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) last month was around 2.50% to 2.55%, there is virtually no difference.
Even though the effect on fund movements is minimal, the deposit insurance premiums the Korea Deposit Insurance Corporation (KDIC) collects from financial firms are set to rise. KDIC is in the process of selecting a contractor for a "recalculation study of the target size of the deposit insurance fund and the deposit insurance premium rate following the higher protection limit." KDIC will also review a plan to differentiate premium caps by sector and push a plan to levy special premiums to bolster fund soundness. The increase is slated for 2028.