Saemaul Geumgo Bank's Real Estate Loans Raise Concerns Over Asset Safety

Saemaul Geumgo Bank, also known as Saemaul Mutual Savings Bank or Saemaul Savings Bank, is facing scrutiny over its real estate project financing (PF) program due to the potential for non-performing loans. Established in 1973 as part of the Saemaul Undong (New Village Movement), the bank has provided large-scale loans totaling 56 trillion won, but the delinquency rate in the 9% range is causing concern for asset safety.

According to information provided to a Democratic Party lawmaker's office by the Ministry of Public Administration and Security, the outstanding loans to construction and real estate firms have more than doubled since the end of 2019, reaching 56.4 trillion won as of January this year. Additionally, the amount of delinquent loans has surged more than sevenfold, with the delinquency rate rising from 2.49% to 9.23%.

The bank's central office has stated that there are no issues with non-performing loans and has implemented measures to address the concerns. They emphasized that the bank only deals with relatively stable managed land trusts and that its delinquency rate remains low at 0.71% as of the end of January.

Meanwhile, some Saemaul Bank branches in Daegu are offering fixed-term deposits with interest rates exceeding 5% to attract customer funds, even as the overall market for such deposits has dried up. Experts caution that the ultimate responsibility for financial product investments, including fixed-term deposits, lies with the investor.

It should be noted that deposits in Saemaul Bank are not covered by the Deposit Insurance Corporation under the Deposit Protection Act. However, the bank's central office has established its own deposit protection reserve fund, guaranteeing up to 50 million won per customer.

Financial authorities have pledged to closely monitor the situation. The bank's central office maintains that it has taken measures to address concerns about non-performing loans and liquidity ratios, and that its real estate project financing and managed land trust loans are stable and senior loans. Critics, however, argue that the high delinquency rates and large-scale loans still present a considerable risk to the bank's asset safety.