[Clock Zero Mutual Finance] Yetecheok Flock but Shaken by Consecutive Adverse Events

[Asia Economy Reporter Bu Aeri] Dark clouds are gathering over mutual finance institutions, which attracted many savings and investment enthusiasts by offering special high-interest rates. At one point, mutual finance institutions drew customers to the extent that there was a spectacle called 'open run,' where people lined up to sign up for savings and deposits. However, recently, as their haphazard management has come under scrutiny, financial consumers' anxiety is growing.

According to the financial sector on the 3rd, mutual finance institutions have been publicly warned twice by the Financial Supervisory Service (FSS) in the past month. On the 29th of last month, the FSS instructed Cheongju Sangdang Credit Union, which caused controversy by sending a notice about raising fixed interest rates, to withdraw the rate increase. The FSS also cautioned all mutual finance institutions except credit unions to prevent similar incidents. On the 14th of last month, regarding the plea to cancel special promotions by local Nonghyup branches, the FSS ordered mutual finance institutions to strengthen internal controls such as special promotion management systems.

As these incidents continue, anxiety about mutual finance institutions is spreading in financial communities. Some customers, having lost trust due to these incidents, are withdrawing their funds. One user said, "It feels like a precursor to a major incident, so out of anxiety, I am planning to withdraw money from the secondary financial sector and move it back to commercial banks."

The controversy over the haphazard management of mutual finance institutions recurs whenever it seems forgotten. Especially since each cooperative operates independently, issues ranging from workplace harassment to embezzlement and recently financial accidents have been continuous. In the cases of local Nonghyup, Saemaeul Geumgo, and credit unions, each cooperative is independently run by its chairman or director, while the central association acts as a kind of control tower. However, insiders agree that the central association does not have detailed knowledge of each local cooperative's situation. The Credit Union Central Association only took action after the fixed interest rate increase controversy arose. A mutual finance official said, "We do not grasp the detailed situations of each cooperative."

Some criticize that the central association neglects its important management duties because it is preoccupied with other matters, such as the nationwide simultaneous cooperative head elections in March and the reappointment issue of the Nonghyup Central Association chairman. Another mutual finance official said, "The company's priorities have shifted, so it is hard to expect detailed management in this situation."

In fact, the deposit balance of mutual finance institutions, which attracted funds through high-interest special promotions, has recently shown signs of slowing down. According to the Bank of Korea's Economic Statistics Financial System, as of October, the deposit balance of mutual finance institutions was 441.68 trillion won, a decrease of 2.409 trillion won compared to September. Moreover, as financial authorities have recently urged restraint in deposit interest rate competition, special promotions are also being reduced, leading to forecasts that deposit amounts will not increase for the time being.