Deposits increasing at savings banks on higher interest rate

SEOUL, June 19 (Yonhap) -- Deposits at savings banks are rising again, recovering from a chain of bankruptcies in 2011, industry data showed Tuesday.

According to the Korea Deposit Insurance Corp. (KDIC), there were 67,888 deposit accounts totaling 9.1 trillion won (US$8.23 billion) as of end-March this year at savings banks. The number of corporate accounts fell by 166 to 1,906 compared with the same month last year, but that of personal accounts increased by 4,568 to 65,981.

Savings banks are preferred over commercial banks for people making deposits because they offer higher interest rates, but they only guarantee up to 50 million won per account in case of bankruptcies. Data showed that some 5.66 trillion won of the money currently deposited at savings banks is unprotected, up 249.1 billion won from end of last year.

Deposits in personal accounts averaged 85 million won. The average for corporate accounts was 1.82 billion won. This is a quarterly increase of 2 million won for retail depositors and of 140 million won for corporate account holders.

"It appears that companies are making deposits at institutions offering higher interest rates, not having many other options," an official at a savings bank said.

Unprotected deposits were as high as 7.6 trillion won in 2009, but a string of bankruptcies by savings banks in 2011 brought them down to as low as 1.7 trillion won in the third quarter of 2013. They came to 2.4 trillion won at the end of 2015 and increased to 4.5 trillion won at end-2016 and to 5.4 trillion won at end-2017.

Savings banks have improved their financial soundness over the years, regulator's records indicate. They are required to maintain a capital adequacy ratio of minimum 8 percent and a non-performing loan ratio of maximum 8 percent by Bank for International Settlements standards. The ratios at the end of first quarter this year was 14.15 percent for the former and 5.2 percent for the latter.

The interest rate on one-year time deposits was 2.46 percent, 0.44 percentage point higher than commercial banks.
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