Wednesday, April 24, 2019
Firms Increase Liquidity to Prepare for Economic Downturn
Banks' Large-sum Deposits Increase
Firms Increase Liquidity to Prepare for Economic Downturn
  • By Yoon Young-sil
  • April 15, 2019, 09:40
Share articles

Increasing uncertaintyies in the business environment are driving companies to increase liquidity instead of investing in facilities.

Banks’ savings accounts with large deposits exceeding 1 billion won (US$880,000) increased at the fastest pace in eight years in 2018. They were mostly accounts owned by businesses.

The total amount of deposits on bank savings accounts which had more than 1 billion won (US$880,000) of balance, including time and installment savings deposits, corporate free savings deposits and savings deposits, came to 565.79 trillion won (US$497.62 billion) at the end of last year, according to the Bank of Korea on April 14. The figure went up by 66.61 trillion won (US$58.58 billion) from a year earlier. This marked the steepest on-year increase since 79.42 trillion won (US$69.85 billion) in 2010. The pace of growth was also the highest in eight years with 13.3 percent. It was nearly two times as high as 7.3 percent of the increase in savings accounts in general.

The number of savings accounts with more than 1 billion won (US$880,000) of deposits stood at 67,000 as of the end of last year, up 5,000 from a year ago.

The rate of increase in large-sum savings deposits over 1 billion won (US$880,000) recorded at 9.2 percent in 2015 but it slightly fell to 7 percent in 2016 and 7.2 percent in 2017. However, the figure suddenly entered a double-digit range last year.

Such savings accounts with a balance of more than 1 billion won (US$880,000) significantly grew in number and amount largely due to the persisting economic uncertainties, which consequently drove companies to prefer liquidity over investment in order to brace for management crisis.

In fact, facility investment dropped by 4.2 percent on-year last year, marking the steepest fall in nine years since the global financial crisis in 2008.