Dollar Deposits at Major Commercial Banks Surge by Over 10%

Last month, dollar deposits at the five major commercial banks in South Korea increased by more than 10%, with corporations leading the surge.

According to the financial sector, the increase in dollar deposits is attributed to the growing demand from import companies that pay in dollars, as the won-dollar exchange rate fell ahead of the US base interest rate cut.

The data shows that dollar deposits at the five major commercial banks (KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank) increased by $5.92 billion from the previous month. This marks the third consecutive month of increase in dollar deposits, following a $4.448 billion increase in July.

Corporations were found to be the primary drivers of the increase in dollar deposits, with the dollar deposit balance of large corporations increasing significantly. In fact, the proportion of corporations’ dollar deposits was as high as 89% among the three commercial banks surveyed.

Shinhan Bank’s dollar deposit balance for corporations increased by about 27% in three months, while Woori Bank’s increased by about 33.2%. In contrast, individual dollar deposit balances at these banks have not changed much this year.

The financial sector believes that import companies that pay in dollars have secured dollars through the declining exchange rate and are putting them in dollar deposits. A bank official explained, “Companies set a target exchange rate, and when it is reached, they buy dollars with won in advance and deposit them in dollar deposits.”

The won-dollar exchange rate touched 1,395.25 won during trading on June 26, then fluctuated, and began to decline in July when the U.S. base rate cut became visible. The exchange rate even fell to the early 1,320 won range on August 19.

There is also an outlook that the dollar exchange rate could fall to the 1,200 won range by the end of this year, which could lead to a further increase in dollar deposit balances.