According to the Federation of Savings Banks on the 3rd, the average interest rate of savings bank deposits (based on 12-month maturity) as of the end of last year was 1.90%, up 0.1 percentage points from the previous year. After falling to 1.65% in August, it rose 0.25 percentage points in four and a half months.
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As of the 1st, Shinhan Savings Bank increased its term deposit products by 0.1 percentage point from 1.8% to 1.9%, and ISA (Individual Comprehensive Asset Management Account) term deposits rose 0.3 percentage points to 1.9%. Yuanta Savings Bank has increased the interest rate for term deposits from 1.9% to 1.95% since the 29th.
The reason savings banks raise interest rates for time deposits is to meet the loan-to-deposit ratio. The deposit-to-deposit ratio is the ratio of the balance of the loan to the balance of the deposit. Savings banks should adjust their loan-to-deposit ratio from 110% to 100% from next year to the level of commercial banks. In fact, it means that in order to make a loan of 100 million won, you have to hold a deposit of 100 million won.
As of 3Q, the average deposit-to-deposit ratio of savings banks stood at 99.9%, which is in the regulatory margin. As the loan regulations for financial companies are eased due to Corona 19, savings banks are said to have been pressured to “meet the standards,” saying that loans from the financial sector have been overheated, although savings banks are not subject to sanctions until next June. .
According to the Bank of Korea, the total balance of domestic savings bank loans as of the end of October was 74.395.5 billion won, an increase of 9,3451 billion won compared to the end of last year (65,504 trillion won). In particular, it increased by more than 1 trillion won per month for 4 consecutive months from July to October. As commercial banks have tightened their lending thresholds, the demand for loans to the second financial sector seems to have risen. At such a speed, it is highly likely that by the end of this year, the increase in loans from the previous year will exceed 10 trillion won. In a situation where loans are increasing, the only way to lower the loan-to-deposit ratio is to actively receive deposits even by raising interest rates.
One reason is to prepare for the Corona 19 shock. Savings banks, like commercial banks, have taken measures to extend the maturity of loans and defer interest repayment to SMEs and small businesses until March next year. The principal repayment of the corona-damaged individual debtor is until next June. Lending debts that are under the surface can burst at any time. Currently, the total credit delinquency rate for savings banks as of the third quarter was 3.8%, up 0.1 percentage points from the end of last year. The microcredit loan delinquency rate was 5.87%, an increase of 0.45 percentage points from the end of last year.
An official in the financial sector said, “As the demand for loans is increasing in the second half, there is a movement to meet the loan-to-deposit ratio.” He added, “There is a possibility of a post-storm after the postponement of interest repayment next year, so there are aspects to be prepared for this,” he added.