Time-deposit rates at commercial banks have returned to the 3% range. As market rates rose on the possibility of a Bank of Korea base rate hike, intensifying competition among banks to attract funds from corporations, boosted by strong exports, also played a role.
According to the Korea Federation of Banks' consumer portal on the 14th, as of the 12th, the top rates on flagship one-year time deposits at the five major banks — KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup — were tallied at 2.90% to 3% per year. Compared with a month earlier, the upper end of the rates rose by 0.05 percentage point.
By bank, Shinhan Bank's "Shinhan My Plus Time Deposit" was the highest at up to 3% per year, followed by NH Nonghyup Bank's "NH All One e-Deposit" at 2.95%. KB Kookmin Bank's "KB Star Time Deposit," Hana Bank's "Hana Regular Time Deposit," and Woori Bank's "WON Plus Deposit" are all around 2.9%.
Some banks are already offering rates in the mid-3% range. Standard Chartered Bank Korea's "e-Green Save Deposit" offers up to 3.65% per year, Jeonbuk Bank's "JB 123 Time Deposit" offers 3.70%, and Kwangju Bank's "Good Start Deposit" offers 3.67%.
Market rates are on the rise as expectations for a base rate hike are reflected. According to the Korea Financial Investment Association, the one-year bank bond yield rose by 0.364 percentage point from 3.221% on May 13 to 3.585% on June 12. The five-year yield also climbed by 0.132 percentage point over the same period, from 4.137% to 4.269%.
When market rates rise, the number of higher-yield products such as bonds increases, intensifying competition to attract deposits. To meet soundness regulations such as the loan-to-deposit ratio, banks must secure a certain level of deposits, leaving them little choice but to raise rates.
Competition to attract deposits to draw in funds accumulated by corporations on the back of strong exports also had an impact. As of the 11th, the balance of time deposits at the five major banks was 948.8374 trillion won, up 4.1213 trillion won from the end of May. Household deposits fell, but deposits from corporations increased, expanding the overall balance.