Sources: South Korea Urges Banks to Set Aside $4B for Credit Union Support

South Korea’s financial services regulator has requested major commercial banks to prepare approximately $4 billion in financing to assist a credit cooperative that has experienced customer withdrawals. The request was made in response to the rise in non-performing loans tied to real estate projects at MG Community Credit Cooperatives. While the regulator did not confirm the amount, it stated that the capital ratio and liquidity of MG Community far exceed regulatory ratios and the cooperative has sufficient cash-equivalent assets.

Depositors have been withdrawing funds from the branch of MG Community Credit Cooperatives in Namyangju, leading to concerns about the potential impact on South Korea’s economy. In response, the top five commercial banks in the country, including Woori Bank, Hana Bank, Shinhan Bank, KB Kookmin Bank, and NongHyup Bank, have been asked to provide financing to MG Community Credit. The actual amount of financing will depend on the extent of deposit withdrawals.

Last week, MG Community stated that its debt delinquency rate is manageable and it will work with the Interior Ministry to improve its financial soundness. Despite the risks associated with the cooperative’s situation, economists believe that any negative effects on economic growth will be limited compared to previous incidents.

To ensure liquidity and stability in the financial sector, South Korean financial authorities have coordinated with financial groups to establish a liquidity program. The program aims to prevent a credit crunch similar to the one sparked by a missed bond payment from theme park developer Gangwon-Jungdo Development.

($1 = 1,302.7800 won)



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