As deposits and savings at mutual finance institutions fell sharply in the first half, the financial authorities moved to step up monitoring. The financial authorities plan to require management plans from financial institutions with weak funding capabilities.
According to the financial sector on the 20th, the financial authorities plan to closely examine the trend of changes in deposits at mutual finance institutions and guide them to activate emergency funding plans if abnormal signs occur. Monitoring has been strengthened as deposit balances at mutual finance institutions have declined this year.
The financial authorities judge that the decline in deposits at mutual finance institutions could trigger market instability, such as increased expense to respond to fund outflows and liquidity shortages. In particular, industry watchers express concern that, with lending operations at mutual finance institutions restricted by household loan regulations, raising funds at high interest rates could increase the expense burden and lead to a deterioration in profitability, hurting revenue.
As of the end of June, deposit balances at mutual finance institutions stood at 903 trillion 415 billion won, down 2.78198 trillion won from the end of last year. Since statistics began in 1993, this is the first time that deposits at mutual finance institutions have decreased on a half-year basis. This year, deposits at mutual finance institutions fell by 4 trillion to 8 trillion won every month except March (up 600 billion won) and April (up 1.8 trillion won). In particular, in May, 8.4666 trillion won in deposits evaporated.
Along with strengthening monitoring, the financial authorities decided to guide the establishment of crisis response plans to prepare for increased market volatility. They are also considering requesting management plans from some vulnerable financial institutions.