If you Redeposit Savings or Time Deposits after Cancelling Saemaeul Geumgo, They Are Tax-Exempt... Pan-Government Response Team "Liquidity Support"

Government Struggles to Quell Crisis Rumors

As financial consumers' concerns about the soundness of Saemaeul Geumgo spread, the government formed an 'Intergovernmental Response Team' on the 5th to address the issue. The government announced that it may provide liquidity support through government borrowing if necessary, and to prevent a bank run (mass withdrawal of deposits), it is considering a plan to restore the agreed interest rates and maintain tax-exempt benefits for Saemaeul Geumgo savings and deposits that are withdrawn and then redeposited.

On the morning of the same day, the Ministry of the Interior and Safety held a joint briefing on the soundness of Saemaeul Geumgo with the Ministry of Economy and Finance, the Financial Services Commission, the Financial Supervisory Service, and the Bank of Korea at the Government Complex Seoul in Jongno-gu, Seoul, stating, "We hope all Saemaeul Geumgo members and the public can rest assured."

Han Chang-seop, Vice Minister of the Ministry of the Interior and Safety, holds a 'Joint Briefing of Related Ministries on Saemaeul Geumgo Soundness' at the Government Seoul Office in Jongno-gu, Seoul on the 6th. Photo by Yoon Dong-joo doso7@

Han Chang-seop, Vice Minister of the Ministry of the Interior and Safety, said, "We are well aware of the growing concerns about soundness due to the recent rise in Saemaeul Geumgo's delinquency rates, but there is no need to worry," adding, "According to relevant laws, deposits and savings up to 50 million KRW per depositor are protected, and even if deposits exceed 50 million KRW, the merged Geumgo will pay the principal and interest."

Vice Minister Han continued, "Since the establishment of the Geumgo 60 years ago, there has never been a case where customers' deposits were not paid," emphasizing, "As of the end of May, the Saemaeul Geumgo Central Association has secured a total liquidity of 77.3 trillion KRW, and if necessary, payments can be made through borrowing from the government, public institutions, and other financial institutions."

He also stressed that the real estate project financing (PF), identified as the main cause of the deterioration in Saemaeul Geumgo's soundness, is relatively safe. Kwon Dae-young, Standing Member of the Financial Services Commission, explained, "Most of the PF loans held by Saemaeul Geumgo are linked to sound construction companies ranked within the top 30 in contract order, with many senior loans and high loan-to-value (LTV) ratios," adding, "While there are some delinquencies in certain land or joint loans, these issues are expected to be resolved over time as the real estate market recovers."

The Ministry of the Interior and Safety and related agencies formed the 'Intergovernmental Response Team,' the crisis management control tower, to closely monitor and respond. The team plans to initiate a three-step contingency plan in case of emergency, including payment of surplus funds deposited in the Geumgo, payment of repayment reserves, and loan support from the Central Association.

The government also plans to actively support the cleanup of delinquent loans to secure soundness. Previously, the government decided to address about 1.2 trillion KRW worth of non-performing loans through MCI Loan and the Korea Asset Management Corporation (KAMCO). Standing Member Kwon explained, "To manage soundness, methods such as selling delinquent assets, writing them off, or debt restructuring are available, and Saemaeul Geumgo is also preparing and implementing appropriate measures," adding, "KAMCO (5 trillion KRW) can also increase the scale of non-performing loan acquisitions if necessary."

In particular, to prevent a large-scale deposit withdrawal incident, authorities are considering a plan to restore the agreed interest rates of existing contracts and maintain tax-exempt benefits as before when savings and deposits withdrawn from Saemaeul Geumgo are redeposited. A Ministry of the Interior and Safety official said, "During the large-scale deposit withdrawal incident at Saemaeul Geumgo in 2011, there was a case where the agreed interest rates were restored if deposits were redeposited within two weeks, and we are currently consulting with related ministries," adding, "The Ministry of Economy and Finance is reviewing the tax-exempt benefits."

Meanwhile, regarding the suggestion that the supervisory authority of Saemaeul Geumgo should be changed from the Ministry of the Interior and Safety to the Financial Services Commission, the government remained cautious. Standing Member Kwon said, "For now, overcoming the current situation and stabilizing it is the priority," and Vice Minister Han also stated, "We will first closely cooperate with the relevant authorities to manage the current situation well."

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