Time deposits at South Korean banks down by $8.83b in June

More people are holding on to their money amidst record-low rates.

Major banks in South Korea saw their time deposits decline in June compared to the previous month, whilst their money market deposits jumped sharply, reports Yonhap News Agency.

This apparently suggests that more people were hoping to invest their money amidst record-low interest rates but were unable to do so amidst a coronavirus-caused slump.

According to the data from five major local lenders, the combined outstanding time deposits at the banks came to $526b (KRW633.1t) as of end-June, down more than $8.83b (KRW10.6t) from a month earlier.

The BOK earlier said the average interest rate paid by banks on all fresh deposits, including those held in money market accounts, came to 1.07% in May, marking a sixth consecutive month of drop.

Many people were, however, also unable to find other investment opportunities amidst worsening economic conditions at home and abroad prompted by the COVID-19 pandemic.

In June alone, outstanding deposits held in money market accounts jumped over $20.24b (KRW24.3t) from a month earlier, compared with a $2.2b (KRW2.6t) increase in May and a $1.08b (KRW1.3t) drop the previous month, according to local lenders KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH Bank.

Such an increase "appears to be money on standby that investors plan to move to the stock or real estate market when they see an investment opportunity," a bank official said.

Meanwhile, bank loans extended to local households continued to increase last month, with enhanced regulations on home-backed loans prompting a sharp increase in credit loans.