Shinhyup Central Association Raises Mandatory Reserve Deposit Ratio from 50% to 80%

[Asia Economy Reporter Kwangho Lee] To strengthen the Korea Federation of Credit Cooperatives' (KFCC) ability to respond to liquidity shortages in credit union cooperatives, the mandatory reserve deposit ratio for the KFCC will be raised from the current 50% to 80%.

On the 21st, the Financial Services Commission announced that the amendment to the Enforcement Decree of the Credit Cooperatives Act containing this content has passed the Cabinet meeting.

First, as the loan volume for real estate and construction industries has recently increased and the delinquency rate on related loans has risen, expanding the possibility of insolvency due to changing market conditions, a regulatory basis for loan limits by industry will be established.

Additionally, a liquidity ratio regulation will be introduced so that mutual finance sector cooperatives can manage liquidity risks independently.

In particular, credit union cooperatives currently deposit half of 10% of the balance of deposits and savings at the end of the previous month as a reserve for repayment with the KFCC to prepare for withdrawal demands; however, this deposit ratio is lower compared to other mutual finance sectors. Therefore, the mandatory reserve deposit ratio for the KFCC will be increased from the current 50% to 80%.

The amendment to the Enforcement Decree approved at the Cabinet meeting will take effect one year after its promulgation. The increase in the reserve deposit ratio will apply starting from the reserve deposits made to the KFCC in January 2023, with the loan limit regulations by industry and liquidity ratio regulations taking effect three years after promulgation.

This content was produced with the assistance of AI translation services.