Korea's new time deposits are 90% corporate money, and borrowers will pay for it

About 90% of last month's increase in time deposits at South Korea's major banks came from exporters such as chipmakers who were promised higher interest rates, according to a new analysis ^[1]. That matters because deposits bought at a premium are not cheap funding, and combined with a broader rise in market rates the shift could push banks' funding costs higher, which feeds straight into lending rates ^[4].

The specific number comes from Lena Kwok, an analyst at Bloomberg Intelligence who covers Korean banks, insurers and securities firms; in a video interview with the Seoul Economic Daily on the 20th she said 90% of the net inflow into time deposits at the five major banks last month came from corporate accounts ^[2]. Her explanation is mechanical rather than mysterious: cash-rich chipmakers, buoyed by strong export earnings, moved idle money out of low-yielding money market deposit accounts and into time deposits to lock in fixed rates ^[3]. Banks helped that along. After the Bank of Korea raised its base rate in July, major banks aggressively raised deposit rates to attract corporate idle funds, and Kwok expects funding costs to keep rising through the second half given the central bank's high-rate stance and competition for deposits ^[8].

The Bank of Korea's own statistics show the composition of the deposit base moving in one direction. Corporate won-denominated deposits stood at 819.8 trillion won at the end of June, up 75.6 trillion won from the end of last year ^[5], while household won deposits fell 24.7 trillion won to 972.6 trillion won ^[6]. That is a 10.2% rise in corporate balances against a 2.5% fall in household balances over six months ^[1][2], and a combined swing of 100.3 trillion won between the two ^[3]. Household demand deposits largely went into stocks and real estate, producing a net outflow from the previous month even as time deposits grew ^[7]. Corporate money is the marginal funder now, and corporate money asks for a rate.

The lending side offers no relief valve. Financial authorities on the 13th raised the ceiling on this year's household debt growth to 3.0% from 1.5% to support housing supply and owner-occupier financing ^[9], but Kwok argues loan supply will not expand much because strict rules remain and lenders will pace growth themselves; she treats regulation as another factor pushing lending rates up ^[10]. Three of the five major banks already exceeded their annual limits in the first half, so she does not expect across-the-board increases in the caps, and those banks will have to throttle growth again in the second half ^[11]. Costlier funding and rationed volume point the same way: price.

What to watch is credit quality, not margins. As banks push lending toward small and mid-sized enterprises and small business owners rather than mortgages under the banner of "productive finance," bad-loan risk is building in a way that could affect the soundness of KB Kookmin, Shinhan, Hana and Woori, according to Kwok ^[12]. She also flags KOSPI volatility, driven by the AI rally and leveraged ETFs, as a vulnerability that could produce funding pressure at small and mid-sized securities firms from forced selling and a rise in bank credit-loan delinquencies ^[13]. Volatility has eased since the government's stabilization measures but remains very high, and retail confidence has not returned even with the rebound since August ^[14].