Korea launches team to ease deposit withdrawal woes at Saemaul Geumgo

Ministry of the Interior and Safety Vice Minister Han Chang-seob announces at a Ministries’ joint briefing at the government’s Seoul office on July 6. [Photo by Yonhap]

As concerns over the stability of some Saemaul Geumgo branches, designated for absorption and merger to address insolvency, grow with customers rushing to withdraw deposits from certain branches, the South Korean government has formed a joint response team involving relevant agencies.

The government reassured that all customer deposits would be protected, even if some vaults undergo mergers, saying that it will provide sufficient liquidity support even through government borrowing if necessary.

The government is also considering options such as maintaining tax benefits and restoring the originally agreed interest rates for customers who redeposit their withdrawn savings in other MG Saemaul Geumgo branches.

On Thursday, the Ministry of the Interior and Safety, the Ministry of Economy and Finance, the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea held a joint briefing at the government’s Seoul office, emphasizing that customers of the community credit cooperatives, as well as the general public, can be reassured.

“Through the joint response team involving relevant agencies, we are closely monitoring the trends in deposits at MG Saemaul Geumgo and proactively responding to risks,” said the Ministry of the Interior and Safety Vice Minister Han Chang-seob, who delivered the announcement.

“We are aware that the recent increase in delinquency rates has raised concerns about the health of MG Saemaul Geumgo, but the delinquency rate is manageable,” he added.

“Like other financial institutions, deposits and savings of up to 50 million won ($38,000) per depositor are protected under the Saemaul Geumgo Act. Even if some vaults are merged with neighboring ones, all customer deposits are guaranteed,” Han said. “Even for deposits and savings exceeding 50 million won, the merged vault will make principal and interest payments.”

According to the ministry, the Korean Federation of Community Credit Cooperatives held a total of 77.3 trillion won in reserve funds, including repayment reserves. It also has 2.6 trillion won in depositor protection reserves as of the end of May.

Additionally, the federation can provide liquidity support through loans and transactions between Saemaul Geumgo branches, and if necessary, payments can be made through borrowing from the government, public institutions, and other financial institutions.