South Korea’s state-run banks are stepping in to provide liquidity support to MG Community Credit Cooperatives (MGCCC), a credit union that has been hit by customer withdrawals. The Industrial Bank of Korea and the Korea Development Bank have signed agreements with MGCCC for a total of at least two trillion won ($1.54 billion).
Concerns have been raised that the situation at MGCCC, which has experienced a rise in customer withdrawals following media reports on its high debt delinquency rates, could lead to a credit crunch in the local money markets.
“MGCCC is not yet in need of all the funds, it seems, but the government is preparing a back-up tool in advance as it cannot leave the credit union continuing to sell bonds,” said Kim Sang-man, a credit analyst at Hana Securities.
In addition to the state-run banks, South Korea’s financial services regulator has also asked major commercial banks to prepare around 5 trillion won in financing to support MGCCC.
MGCCC claims that its debt delinquency rate is manageable and that it will work with the Interior Ministry to improve its financial soundness. So far, there have been no signs that the situation at MGCCC is affecting South Korea’s major commercial banks.
Credit default swap (CDS) premiums at the lenders have remained relatively stable, with the five-year Woori Bank CDS quoted at 45.33 on Tuesday, compared to 45.29 at the end of June. Kookmin Bank’s CDS was quoted at 51.59, compared to 75.18 last November.
In November, concerns over a state-backed theme park’s missed bond payment triggered a credit crunch in the domestic money markets, but the situation stabilized after the introduction of various liquidity support programs.
($1 = 1,297.7400 won)
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
Denial of responsibility! Samachar Central is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
