[The Crisis in Secondary Financial Sector]③ High-Interest Deposit-Selling Cooperatives' 'Liquidity Instability'

Among the mutual finance sector's unit cooperatives offering high-interest deposit products, 70% have liquidity ratios below 100%. In some cooperatives, the liquidity ratio was even below 50%. This means they have less than half the capacity to cover customer withdrawal demands.

On the 19th, Asia Economy analyzed disclosures from 21 mutual finance unit cooperatives (7 each from Saemaeul Geumgo, Agricultural Cooperatives, and Credit Cooperatives) selling high-interest deposit products, finding that 15 of them, or 70%, had liquidity ratios under 100%. The surveyed cooperatives offer deposit products with interest rates in the 4-5% range.

The liquidity ratio refers to the proportion of liquid assets available to cover liabilities such as deposits maturing within three months. Generally, authorities require financial institutions to maintain a liquidity ratio of 100% or higher, but this regulation has not yet been applied to the mutual finance sector.

In the case of Nonghyup, all seven cooperatives offering deposits with annual interest rates in the 4% range?Haseo, Hyodon, Namwonju, Gangjin, Gyeyang, Geumman, and Namwon?had liquidity ratios below 100%. Notably, Jeju's Hyodon (48.9%), Gyeyang (42.85%), and Namwon Nonghyup (43.80%) had liquidity ratios below 50%.

For Saemaeul Geumgo, liquidity ratios were poor mainly in the Daegu area, with Seongnae Saemaeul Geumgo (88.79%) and Daeshin Saemaeul Geumgo (82.29%) in Daegu having liquidity ratios below 100%. Seoul's Dorim Saemaeul Geumgo and Jeonnam Yeosu Hanryeo Saemaeul Geumgo also recorded ratios of 74.18% and 71.45%, respectively.

Unlike other mutual finance sectors, even Credit Cooperatives, overseen by the Financial Services Commission, had many locations with liquidity ratios below 100%. In Daegu, Daeseo Credit Cooperative had a liquidity ratio of 54.98%, Hanil Credit Cooperative had 54.84%, and Bukseong Credit Cooperative was at 47.85%, falling below 50%. Wonju Balgeum Credit Cooperative also recorded a liquidity ratio of 55.65%, far below 100%.

Starting next year, mutual finance cooperatives will be subject to liquidity ratio regulations under the Mutual Finance Business Supervision Regulations, requiring a liquidity ratio of 100% (or 90% for cooperatives with total assets under 100 billion KRW). Although urgent improvement is needed, there is still a long way to go. A mutual finance sector official said, "The liquidity ratio is an important soundness indicator, but low liquidity does not necessarily mean insolvency. Especially last year, the liquidity ratio may have temporarily decreased due to special high-interest promotions." He added, "However, since the supervisory authorities will require a 100% liquidity ratio starting next year, the entire industry will inevitably have to adjust, including refraining from high-interest deposits."