Deposit withdrawals at South Korea credit union have stabilised -ministry

SEOUL (Reuters) – Customer withdrawals from MG Community Credit Cooperatives (MGCCC), a troubled South Korean credit union, have clearly stabilised amid government efforts to ward off a liquidity crunch, the interior ministry said on Wednesday.

South Korean state-run banks this week pledged to offer liquidity support totalling at least 2 trillion won ($1.55 billion) to MGCCC, after media reports about its debt delinquency rates triggered deposit withdrawals.

MGCCC has said its debt delinquency rate was manageable, while there have been no signs of any spillover impact on South Korea’s large commercial banks so far.

But financial authorities have intensified efforts to head off the risk of a money market crunch in Asia’s fourth-largest economy, also asking commercial banks to provide some 5 trillion won in financing to support the credit union, sources told Reuters.

More than 12,000 MGCCC customers had restored their accounts as of Wednesday afternoon, after the credit union offered to retain interest and tax incentives on deposits if savings withdrawn between July 1-6 were returned by Friday, the interior ministry said, without specifying how many accounts had been closed.

($1 = 1,289.4100 won)