The turnover rate of demand deposits in the banking sector has decreased for two consecutive months. This decline is attributed to increased domestic and international uncertainties and heightened volatility in the stock market, leading households and businesses to postpone investments and spending. Some of the idle funds are shifting to time deposits, which offer higher interest rates.
According to the Bank of Korea on August 10, the turnover rate for demand deposits at deposit banks was recorded at 21 times in May, down 2.1 from 23.1 in the previous month, marking the lowest level since February (19.1 times).
The turnover rate indicates the ratio of withdrawal amounts to average balances, reflecting how often deposits are withdrawn or transferred over a certain period. A lower turnover rate suggests that the speed at which money remains in accounts for investment or consumption has slowed.
The demand deposit turnover rate peaked at 23.6 times at the end of last year, the highest in a decade, before dropping to 21.4 times in January and 19.1 times in February. It rebounded to 23.5 times in March but fell again to 23.1 times in April and 21 times in May, marking two consecutive months of decline. The turnover rate for checking accounts, primarily used by businesses for transaction payments and investments, also fell to 632.8 times in May, dropping below 600 for the first time since February.
Market analysts attribute this trend to increased stock market volatility and rising interest rates, prompting households and businesses to prioritize cash reserves over active investments or spending. With the upward trend in benchmark interest rates, banks have raised deposit rates, reducing the incentive to shift funds into riskier assets. According to the Capital Market Research Institute, the daily return volatility of the KOSPI index in the first half of this year was 3.6%, more than double last year's 1.4%.
In fact, there is a noticeable trend of funds moving from demand deposits to time deposits. As of August 7, the balance of time deposits at the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—was recorded at 994.7 trillion won, an increase of 45.3 trillion won from 949.4 trillion won at the end of June. This month alone, it rose by 9.7 trillion won from 984.9 trillion won at the end of last month.
Conversely, the balance of demand deposits, a typical form of short-term liquid funds, decreased from 722.3 trillion won at the end of June to 666.1 trillion won as of August 7, a drop of 56.1 trillion won. While the overall balance of demand deposits has significantly decreased, the turnover rate of the remaining funds has also slowed. Analysts suggest that rather than quickly moving into investments or consumption, some funds are shifting to relatively higher-yielding time deposits, while others are being held for liquidity.
A source from a major bank's funding department stated, "As stock market volatility increases and interest rates rise, there is a strong tendency for both households and businesses to delay active investments or spending. It is likely that the trend of funds moving to time deposits and the slowdown in demand deposit turnover will continue for the time being."
According to the Bank of Korea on August 10, the turnover rate for demand deposits at deposit banks was recorded at 21 times in May, down 2.1 from 23.1 in the previous month, marking the lowest level since February (19.1 times).
The turnover rate indicates the ratio of withdrawal amounts to average balances, reflecting how often deposits are withdrawn or transferred over a certain period. A lower turnover rate suggests that the speed at which money remains in accounts for investment or consumption has slowed.
The demand deposit turnover rate peaked at 23.6 times at the end of last year, the highest in a decade, before dropping to 21.4 times in January and 19.1 times in February. It rebounded to 23.5 times in March but fell again to 23.1 times in April and 21 times in May, marking two consecutive months of decline. The turnover rate for checking accounts, primarily used by businesses for transaction payments and investments, also fell to 632.8 times in May, dropping below 600 for the first time since February.
Market analysts attribute this trend to increased stock market volatility and rising interest rates, prompting households and businesses to prioritize cash reserves over active investments or spending. With the upward trend in benchmark interest rates, banks have raised deposit rates, reducing the incentive to shift funds into riskier assets. According to the Capital Market Research Institute, the daily return volatility of the KOSPI index in the first half of this year was 3.6%, more than double last year's 1.4%.
In fact, there is a noticeable trend of funds moving from demand deposits to time deposits. As of August 7, the balance of time deposits at the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—was recorded at 994.7 trillion won, an increase of 45.3 trillion won from 949.4 trillion won at the end of June. This month alone, it rose by 9.7 trillion won from 984.9 trillion won at the end of last month.
Conversely, the balance of demand deposits, a typical form of short-term liquid funds, decreased from 722.3 trillion won at the end of June to 666.1 trillion won as of August 7, a drop of 56.1 trillion won. While the overall balance of demand deposits has significantly decreased, the turnover rate of the remaining funds has also slowed. Analysts suggest that rather than quickly moving into investments or consumption, some funds are shifting to relatively higher-yielding time deposits, while others are being held for liquidity.
A source from a major bank's funding department stated, "As stock market volatility increases and interest rates rise, there is a strong tendency for both households and businesses to delay active investments or spending. It is likely that the trend of funds moving to time deposits and the slowdown in demand deposit turnover will continue for the time being."
* This article has been translated by AI.
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