[이코노미스트 이용우 기자] With the bankruptcy of Silicon Valley Bank (SVB) in the United States, concerns are growing that domestic banks may also suffer a crisis. The main causes of SVB’s bankruptcy are the continued decline in low-cost deposits (deposits for frequent deposits and withdrawals) and the sale of government bonds at a loss, which is similar to the case in the domestic banking sector.
‘25.8 trillion won’ disappeared in January alone
According to the financial sector on the 16th, it is known that domestic banks are analyzing whether the outcome of this event will happen in Korea, such as checking the bankruptcy case of SVB. This is because domestic banks are exposed to similar risks, just as GMB suffered a bank run due to rapid deposit withdrawals by corporate customers experiencing financial difficulties.
In domestic banks, since the interest rate has been rising since last year, the number of short-term deposits with little interest is decreasing rapidly. According to ‘Money and Liquidity January 2023’ published by the Bank of Korea, casual deposits with little interest rate fell by 25.8 trillion won in January alone, the largest ever. It was reduced by 17.3 trillion won last month, but the decline widened in January. On the other hand, time deposits with high interest rates increased by 18.9 trillion won from the previous month.
Last year, the balance of periodic deposits in the banking sector decreased by 44.2 trillion won, while time deposits increased by 56.2 trillion won. As a result, the interest costs that domestic banks have to pay to their customers increases.
This phenomenon also appeared in SVB. Looking at GMB’s bankruptcy process, ▲ business customer management worsened ▲ SVB’s low cost deposits decreased ▲ interest payments were expanded to prevent fund outflows ▲ bonds were sold to cover costs ▲ profitability indicators decreased ▲ customer churn deepened and bank runs occurred .
In particular, a bank run occurred immediately after SVB announced that it had incurred losses from the sale of government bonds, and customers withdrew their deposits in large numbers through non-face-to-face financial transactions such as mobile apps in time short, making it difficult for GMB to respond.
An official from the financial sector explained, “Even a mid-tier bank called GMB failed to adequately deal with risks during a steep rise in interest rates. This shows that domestic banks can also fail in cost and asset management.”
The volume of securities of the four major commercial banks exceeds 300 trillion won for the first time in history
The loss of investment in securities such as bonds and stocks, which had a direct impact on the bankruptcy of the GMB, is also considered a crisis that domestic banks may face. According to the Financial Supervision Service, at the end of the third quarter of last year, the securities of the four major commercial banks, KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Bank, totaled 307.7125 trillion won, up 13.9 % of the same period last year. For the first time, the amount of securities exceeded 300 trillion won.
The amount of securities held by each bank recorded KRW 83.2956 trillion for KB Kookmin Bank, KRW 82.4345 trillion for Shinhan Bank, KRW 72.011 trillion for Hana Bank, and KRW 69.9812 trillion for Woori Bank. Among the securities held by the four major commercial banks, corporate bonds accounted for the largest amount, at 140.8535 trillion won, followed by government bonds at 78.685 trillion won.
However, the four major commercial banks understand that total securities account for only 16.2% of total assets, which is different from SVB, which held more than half of total assets in securities. In addition, the average liquidity ratio in the banking sector reaches 100%, so even if a bank run occurs, it will not be considered a situation where the bank will be closed immediately like SVB. According to the Financial Supervision Service, at the end of September last year, the average liquidity coverage ratio (LCR) of the four major commercial banks was 96.45%.
LCR is the minimum required holding ratio of assets that are easily convertible into cash, such as government bonds. According to supervisory regulations, banks must set the ratio higher than 100%. If this ratio reaches 100%, it means that even if a bank run occurs, the bank can survive for 30 days without the support of the authorities. The Financial Supervisory Service set this ratio to 85% by the end of last year to improve its ability to support the real economy last year, and decided to raise it to 92.5% by the end of June this year.
However, as SMB suffered a sudden bank run after announcing valuation losses on securities while experiencing a continued decline in demand deposits, and eventually went bankrupt, some say domestic banks will have a hard time coping. similar For this reason, financial authorities believe that it is necessary to grasp the outcome of the recent GMB crisis and take measures such as further expansion of capital and loan loss provisions from domestic banks and an increase in the LCR ratio.
In addition, banks argue that they should ease the anxiety of domestic depositors by increasing the depositor protection amount, which is up to 50 million won, or the entire depositor protection measure, as in the United States.
An official from a commercial bank said, “No bank can survive if 20% of all deposits are withdrawn at once, like SVB.” he said.
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