Korea Investment & Securities is selling, first come first served until the end of this month, a product paying 5.0% a year on one-year money to customers who bring in new cash. Kiwoom Securities launched a three-month product on Oct. 8 paying 5.80% a year before tax. Major banks' one-year time deposits pay around 3%.
The common read is "brokerages are fighting with high-rate specials, so they beat deposits." But the real point is elsewhere. These products are "brokerage notes," and they lack the deposit insurance that bank deposits have. Deposit insurance means that even if a financial company fails, the Korea Deposit Insurance Corp. pays you back up to 100 million won (about $75,000).
The brokerage borrows your money in its own name → it puts that money into corporate finance and other lending to pay you interest → if the brokerage goes bust, no one else pays you back.
- What exactly is a brokerage note?
Brokerage notes can only be sold by large brokerages with equity capital (the company's own money after debts) of 4 trillion won (about $3 billion) or more, and they mature within one year. With Samsung Securities' approval in September, eight brokerages now issue them. The brokerage invests customers' money in corporate finance, real estate finance and the like, and uses those investments to fund principal and interest. Still, whatever those investments return, the brokerage itself is responsible for paying back principal and interest at maturity.
It's like lending a friend money and getting an IOU. A bank deposit is, in fact, also a loan to the bank. The difference: if a bank can't pay, the Korea Deposit Insurance Corp. pays instead. Brokerage notes have no such guarantor.
- How much more interest do they pay?
Korea Investment's 5.0% is for customers bringing in new money; customers who already have an account get 4.4% for one year. Samsung Securities will launch a one-year 4.3% product on Oct. 12, capped at 100 billion won (about $75 million). Its first 100 billion won round sold out in two and a half days.
Say you put 10 million won (about $7,500) away for a year. At 5.0%, the pre-tax interest is 500,000 won (about $375); a bank deposit at 3% would pay 300,000 won (about $225) (an illustration). Put simply, you earn 200,000 won (about $150) more a year in exchange for giving up protection.
- Why are these products everywhere now?
Yonhap News Agency read it as brokerages offering high rates to hold on to money that was leaving a sluggish stock market for the steady interest of banks. The market has grown, too. At the end of June, before Samsung Securities was approved, the seven issuers had 55.9291 trillion won (about $41.8 billion) in notes outstanding. That was 26.0% more than a year earlier, when there were four issuers, so part of the increase comes from new issuers joining.
For brokerages, it's a source of money with simpler procedures than issuing public corporate bonds. Even if they pay customers 1 to 2 percentage points more, they need to earn more than that by investing the money in corporate finance and the like for it to pay off.
- If the brokerage goes bust, what happens to my money?
Since Sept. 1, 2025, the deposit insurance limit has been 100 million won (about $75,000) per person, per financial institution, principal and interest combined. Brokerages (investment dealers and brokers) are covered institutions. So cash simply left in a brokerage account (customer deposits) is on the list of protected products, up to 100 million won combined with that brokerage's other protected products.
But the moment you use that money to buy a brokerage note, it leaves that protection. Brokerage notes are not covered by deposit insurance, so if the brokerage defaults or goes bankrupt, you can lose part or all of your principal. In the same app and the same account, a single button decides your money's fate.
Think of an umbrella. A bank deposit is walking in the rain under a 100-million-won umbrella; a brokerage note is walking with the umbrella folded. If it doesn't rain, there's no difference. If it does, you get soaked.
- Has money outside the protection actually been lost?
When Busan Savings Bank was suspended in February 2011, deposits above the then-limit of 50 million won could not be paid from deposit insurance. The amount over the limit could be partly recovered only by joining the bankruptcy process and receiving a share based on the payout ratio. The Korea Deposit Insurance Corp. counted about 38,000 victims, including depositors with more than 50 million won and holders of subordinated bonds (debt repaid last when a company fails) (as reported in 2020).
There is a difference this time. Back then, deposits were protected up to 50 million won, but brokerage notes, like subordinated bonds, are unprotected from the first won. That said, the issuing brokerages are large firms with more than 4 trillion won in equity capital, and they are obliged to repay principal at maturity unless they default or go bankrupt.
- BITPRESS Insight
The 1 to 2 percentage points of extra interest on brokerage notes are not free. They are the price of betting your principal that "this brokerage won't go bust before maturity." If this is money that left the stock market looking for a safe place, first check whether the new place is as safe as you think.
That doesn't make brokerage notes a bad product. The problem is buying them thinking they're the same as a deposit. Even comparing the highest one-year rate, 5.0%, with a 3% bank deposit (an illustration), you earn 200,000 won more a year on 10 million won, while the full 10 million won is at stake if the brokerage collapses.
There is one test. First ask whether losing this money would turn your life upside down. If so, keep it inside deposit insurance even if it earns less, and put only what you could survive losing into products that pay more.
Sources
https://www.yna.co.kr/view/AKR20261009024400008
https://www.fsc.go.kr/edu/news/85077
https://www.bokjiro.go.kr/ssis-tbu/cms/pc/news/promotion/1308414_1118.html
https://securities.koreainvestment.com/mobile/item/_view/MMO50800.jsp
https://biz.sbs.co.kr/amp/article/20000336088
https://www.dailian.co.kr/news/view/1598768
https://core.asiae.co.kr/article/2026091321332855281
https://www.mt.co.kr/finance/2011/02/17/2011021714195396056
https://www.khan.co.kr/article/202002271811001
Glossary
Brokerage notes — A short-term product of up to one year that large brokerages with 4 trillion won or more in equity capital sell when they borrow customers' money on their own credit.
Deposit insurance — A system in which, even if a financial company fails, the Korea Deposit Insurance Corp. pays back up to 100 million won per person, per institution, principal and interest combined.
Customer deposits — Cash left in a brokerage account without buying stocks; it is on the list of products covered by deposit insurance.
Equity capital — The company's own money: its assets minus its debts.
Special offer — A limited-time or limited-amount sale on better terms than usual.
BITPRESS articles are information to help your investment decisions, not a recommendation to buy or sell any stock or coin. Investment decisions and their results are your own responsibility.
