Bank of Korea says July bank deposits fell as credit rose

The Bank of Korea said that bank deposits fell by 30 trillion won in July after a 28.8 trillion won inflow in June, as corporate funds placed to manage financial ratios at quarter-end flowed back out and companies made value-added tax payments. Demand deposits drove much of the fall, while time deposits grew as banks secured funding for loans and sought to meet regulatory ratios.

Household loans at banks increased by 5.4 trillion won, down from a 7.6 trillion won rise in June. Mortgage lending increased by 3.4 trillion won after a 4.3 trillion won rise in June. The effects of housing transactions in the Seoul metropolitan area persisted, but falling rental transactions and weaker demand for interim payments on pre-sold homes narrowed the increase. Other loans rose by 2 trillion won, compared with 3.3 trillion won in June, as individual stock investment slowed.

Corporate lending increased by 7.7 trillion won from 5.1 trillion won in June. Lending to large companies rose by 3.8 trillion won after a 3.4 trillion won increase, as demand for working capital to repay corporate bonds continued and banks rebooked loans temporarily repaid at the end of the quarter. Lending to small and medium-sized enterprises rose by 3.9 trillion won from 1.7 trillion won, driven by value-added tax payments and expanded lending by some banks.

Funds at asset-management companies fell by 42.8 trillion won in July, widening from an 11.7 trillion won decrease in June. Stock funds declined by 56.2 trillion won after a 3.5 trillion won increase, reflecting lower share prices, though new money excluding valuation changes continued to flow into stock funds and derivatives funds.

The Monetary Policy Committee raised the policy rate on July 16. "Monetary policy will need to maintain a rate-increase stance," the committee said, adding that the timing and pace of further moves would depend on inflation pressures, economic recovery and financial stability.