Korean Banks Shift to CDs as Deposit Growth Slows
South Korean banks are increasingly relying on certificates of deposit (CDs) to attract funds as growth in core deposits stalls, a trend observed in the final quarter of 2025. This shift comes amid a period of stable interest rates and a waning appetite for demand deposits.
CD Issuance Surges
The move towards CDs is evident in the financial results of major Korean banks. Hana Financial Group experienced a significant increase in marketable deposits – which include CDs – rising 58.1% quarter-on-quarter to 21.1 trillion won ($14.6 billion) as of February 20, 2026. Risk.net reports that this growth was accompanied by a 2.1% decrease in core deposits over the same period.
Interest Rate Environment and Bank of Korea Policy
The Bank of Korea (BOK) has maintained its base rate at 2.50% during the intermeeting period, as of January 15, 2026. Bank of Korea. This stable interest rate environment, coupled with a reduced focus on attracting demand deposits, has prompted banks to turn to CDs as a more effective means of securing funding.
Broader Trends in Korean Banking
The shift to CDs reflects a broader challenge faced by Korean banks in maintaining deposit growth. Fitch Ratings anticipates that the interest rate cycle will turn, and ongoing restructuring of property developers and increased regulatory pressure will constrain banks’ profitability. Although, risk-adjusted profitability is expected to remain around 2%.
Industry Discussion
Industry discussions, as highlighted on Risk.net’s Facebook page, are exploring the reliance on funding sources like CDs and the Federal Home Loan Bank (FHLB).
Key Takeaways
- Korean banks are increasing CD issuance to offset slowing core deposit growth.
- Hana Financial Group saw a 58.1% increase in marketable deposits in Q4 2025.
- The Bank of Korea has maintained a base rate of 2.50% as of January 15, 2026.
- Industry analysts anticipate challenges to bank profitability due to restructuring and regulatory pressures.