Banks' term deposits attract largest sum in 20 yrs

A fresh 36.4 trillion won ($25 billion) was placed into bank accounts in South Korea in September, whereas 12.4 trillion won ($8.6 billion) was withdrawn from asset management firms in the month, central bank data showed on Thursday.

A big chunk of the money, or 32 trillion won ($22 billion), went to term deposits. It marked the largest sum of monthly inflows to banks' term deposits since the Bank of Korea (BOK) started compiling the data in January 2002.

With the central bank expected to maintain its tightening stance at least through early next year, bank deposits will likely continue to absorb market liquidity. 

This year, over 130 trillion won has flowed to bank accounts in South Korea as of end-September, an 870% surge from the same period a year earlier.

Of the total, 65% had been deposited in the past three months, after the central bank delivered its first-ever 50-basis-point raise in July. 

Following BOK's second 50-bp hike to 3.00% on Wednesday, interest rates on one-year term deposits at banks are set to jump to the 5% range.

CORPORATE LOANS

As for lending, bank loans extended to large business groups increased sharply last month since they had difficulty raising money in the bond market, the BOK said in its monthly financial market report.

Korean conglomerates borrowed a new 4.7 trillion won from banks last month in aggregate, compared with their August borrowings of 2.9 trillion won.

The most liquid three-year treasury bond yield has risen by 2.39 bps to 4.19% in September since the end of last year. The benchmark Kospi stock index has declined 27% this year as of end-September.

Write to Mi-Hyun Jo and So-Hyun Lee at mwise@hankyung.com
Yeonhee Kim edited this article.