A ₩17T run hit Korea's community banks — the first in twelve years

MG Saemaul Geumgo, Korea's network of community credit cooperatives, held ₩290.7 trillion of assets and ₩259.4 trillion of deposits while lending heavily into real estate project finance. By the end of June 2023 its overall delinquency rate had reached 5.41%, up 1.82 points in a year, with corporate loans at 8.34%; the first half of 2023 produced a ₩123.6 billion net loss.

Then came the run. In July 2023 about ₩17 trillion of deposits was withdrawn, in Korea's first bank run in twelve years: 417,367 fixed-term deposits and installment savings were cancelled early, more than double a year earlier, and depositors gave up ₩377.3 billion of interest to get out. On 6 July the government formed a joint response team — interior and finance ministries, the FSC, the FSS and the Bank of Korea — to monitor flows and provide liquidity, reassuring customers that deposits up to the ₩50 million protection limit were safe.

The clean-up priced the damage: up to ₩3 trillion of delinquent loans were slated for sale in the second half of 2023, ₩2 trillion to KAMCO; loss-absorption coverage on real-estate and construction corporate loans was raised to 130%; and individual credit unions were barred from handling large corporate loans without the central association. Net inflows resumed in August, but the run had exposed a supervisory blind spot: the network sat outside direct FSS oversight, and a post-crisis agreement split soundness supervision between financial regulators and the interior ministry.