SEOUL — South Korean commercial banks are aggressively raising interest rates on fixed-term deposits to the 3% range. Driven by a surge in market interest rates and growing concerns over a "money move" toward a booming stock market, banks are fiercely competing to lock in massive idle corporate funds generated by robust national exports.
According to the reaction from the Korea Federation of Banks on June 12, the maximum annual interest rates for flagship one-year maturity fixed deposits at the nation’s top five commercial banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood between 2.90% and 3.00%. This marks a 0.05 percentage point increase in the upper band compared to the previous month. Furthermore, select regional and foreign-capitalized banks are intensifying the competition by offering special promotional rates in the mid-to-high 3% range.
Among the top five lenders, Shinhan Bank’s "Shinhan My Plus Vertex Deposit" offered the highest peak rate at 3.00%, closely followed by NH Nonghyup Bank’s "NH All-One e-Deposit" at 2.95%. KB Kookmin’s "KB Star Fixed Deposit," Hana’s "Hana One Fixed Deposit," and Woori’s "WON Plus Deposit" each provided a maximum rate of 2.90%.
Financial experts anticipate a steady influx of high-yield deposit products in the coming weeks. Bank of Korea data indicates that the weighted average interest rate for one-year maturity time deposits rose to 3.04% in April, breaking the 3% threshold for the first time in 15 months since January of last year. Some institutions have already surged past this; SC First Bank offers up to 3.65% on its "e-Green Save Deposit," while Jeonbuk Bank and Kwangju Bank provide peak rates of 3.70% and 3.67%, respectively.
The upward trajectory in deposit rates is primarily fueled by a preemptive rise in market benchmark rates, driven by expectations of an impending policy rate hike. Over the past month, the yield on one-year bank bonds jumped by 0.364 percentage points, while five-year bonds climbed 0.132 percentage points. This surge in funding costs has concurrently pushed the upper boundary for fixed-rate home mortgage loans near 7.5%, with credit loan ceilings surpassing the 6% mark, significantly compounding the financial burden on household borrowers.
The most notable trend amid this shift is the massive migration of corporate liquidity out of Money Market Deposit Accounts (MMDAs)—frequently utilized as corporate "parking accounts"—and into structured time deposits. In the first half of this month alone, the aggregate MMDA balance across the top five commercial banks plummeted by nearly 9.97 trillion won, marking the sharpest contraction in over two years. Conversely, the combined fixed-term deposit balances at these five major banks surged by 4.12 trillion won over the same period, reaching a total of 948.83 trillion won and logging solid growth for two consecutive months.
While individual retail depositors continue to pull funds from banks to chase higher returns in the capital markets, the overall influx of liquidity has been sustained entirely by the banking sector's strategic pivot toward corporate clients. To mitigate the systemic risk of abrupt withdrawals from demand deposits, banks are luring major enterprises with highly competitive, preferential rates on short-term fixed deposits of under a year.
"Given that MMDAs require banks to pay relatively high interest on highly volatile funds, it is significantly more cost-efficient to incentivize corporate clients to shift their liquidity into time deposits where the capital can be locked in stably for a predetermined duration," a senior official at a major commercial bank stated. "As the market enters a definitive tightening cycle, this serves as a critical, preemptive measure to secure stability in loan provisioning and capital management."
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