South Korea's largest savings banks are taking in deposits that mature within a year and lending the money out over much longer terms, raising concerns that they would struggle to meet a bank run in a crisis.
SBI Savings Bank, the largest in the sector by assets, held 5.15 trillion won in time deposits maturing within one year as of the end of June, or 63.3% of its total time deposits, according to financial industry data on the 20th. Deposits maturing in one to two years totaled 1.23 trillion won, and those maturing in two to three years came to 1.76 trillion won. The bank had no deposits with maturities beyond three years.
Loans with maturities of more than five years, by contrast, amounted to 4.15 trillion won, or 38% of the total. Loans maturing within one year came to just 1.88 trillion won, about 17.2%. That means more than 5 trillion won must be returned to depositors within a year, while only about 1.88 trillion won in loans comes due over the same period and can be redeployed.
Loans with maturities of a year or longer totaled 8.99 trillion won, or 83.8% of the book. That is roughly 1.74 times the amount of deposits maturing in less than a year, locked up in relatively long-dated loans. Reliance on short-term deposits has improved from a year earlier, when the share stood at 70.5%, but industry officials say the mismatch remains severe.
OK Savings Bank is in a similar position. Its time deposits maturing within one year stood at 3.82 trillion won at the end of June, while loans with maturities of a year or longer alone came to 6.82 trillion won — 1.78 times the amount of money that must be repaid within a year.
At Welcome Savings Bank, deposits maturing within a year totaled 2.20 trillion won, or 70.4% of all time deposits. Loans maturing in a year or more came to 2.77 trillion won, exceeding that figure by 565.1 billion won. Welcome has no deposits with maturities beyond three years, yet its loans of three years or longer reach 1.90 trillion won. Acuon Savings Bank also carries a large long-term loan balance, with 2.12 trillion won in deposits maturing within a year against 2.78 trillion won in loans of a year or longer.
Korea Investment Savings Bank, an affiliate of Korea Investment & Securities, was the only lender among the group with more deposits maturing within one year, at 4.88 trillion won, than loans of a year or longer, at 2.18 trillion won.
Market participants agree that the sector's abnormal business practices need to be corrected. With interest rates rising, many argue that savings banks must restructure the maturity profiles of their deposits and loans, since delinquencies could climb sharply. If bad loans mount and cannot be recovered while short-term deposits come due one after another, lenders may not have enough cash on hand to pay them out.
In that case, they would have little choice but to raise deposits urgently at high rates, or take money from corporate and institutional clients on unfavorable terms. Industry officials say that would erode profitability. Banks can also pay out deposits from securities holdings rather than loans, but the need to raise funds quickly puts them at a disadvantage. Deposit-taking institutions fundamentally need their deposit and loan maturities to line up, industry officials said. One savings bank industry official stressed that a maturity mismatch between deposits and loans becomes more problematic when rates are rising, adding that it will weigh on profitability for a long time to come.
Sector-wide loans stood at 96.25 trillion won and deposits at 105.21 trillion won as of the end of July, according to the Bank of Korea, putting the loan-to-deposit ratio at about 91.48%.
A senior savings bank industry official said money taken in as deposits of less than a year is going out as long-dated loans, leaving it tied up until the loan contracts end. The official added that while deposits can be paid out by drawing on assets other than loans, it is clear that the industry needs to change its overall maturity structure.
