[Reporter’s Notebook] Concerns Over Saemaeul Geumgo as a "Ticking Time Bomb," Supervision Remains a Blind Spot

When I first started visiting the Financial Supervisory Service (FSS), the most puzzling thing was that Saemaeul Geumgo, with assets nearing 300 trillion won, was consistently excluded whenever data related to mutual finance institutions was released. A similar situation recently occurred at the Bank of Korea. The Bank of Korea excluded Saemaeul Geumgo from its report on non-bank real estate project financing (PF) exposure, explaining that it was difficult to obtain related statistics through the FSS.

The problem is that Saemaeul Geumgo, a major player in the real estate loan market, is not free from insolvency issues. The outstanding balance of Saemaeul Geumgo’s managed land trust project loan was only 169.4 billion won in 2019 but increased to 15.5079 trillion won by the end of last year. The delinquent amount rose nearly tenfold from 6 billion won at the end of 2021 to 60.2 billion won at the end of last year, and as of the end of January this year, the delinquent amount reached 111.1 billion won. Although 'insolvency warning lights' are flashing, financial authorities find it difficult to even grasp the statistics.

The reason this happens is that the supervisory authority over Saemaeul Geumgo lies with the Ministry of the Interior and Safety. According to the Saemaeul Geumgo Act, the Ministry of the Interior and Safety supervises Saemaeul Geumgo and the Saemaeul Geumgo Central Association, and is instructed to supervise credit and mutual aid businesses in consultation with the Financial Services Commission (FSC). While the Ministry of the Interior and Safety can request support from the FSS during inspections, the FSS does not have direct supervisory authority.

This contrasts with institutions like Nonghyup, Suhyup, and Shinhyup, which operate similar businesses and are supervised by the FSS. In particular, Shinhyup is regulated similarly to banks because the FSC is its main regulatory body, and the supervisory systems for Nonghyup and Suhyup are also well organized. Saemaeul Geumgo, under the jurisdiction of the Ministry of the Interior and Safety, remains a 'blind spot' even within the National Assembly’s economic standing committees.

Given this situation, Saemaeul Geumgo is uniquely prone to controversies. Last year, there were various embezzlement incidents, and just the day before, an employee of the Saemaeul Geumgo Central Association was arrested by prosecutors on charges of involvement in illegal commission payments related to PF loans. The Ministry of the Interior and Safety explains that it manages and supervises safely whenever incidents occur, but it inevitably lacks the expertise compared to financial authorities that oversee and manage financial institutions.

As these issues have been raised for years, related bills have also been proposed in the National Assembly. Lee Hyung-seok, a member of the Democratic Party of Korea, has proposed a partial amendment to the Saemaeul Geumgo Act to have financial authorities manage Saemaeul Geumgo’s credit business. Recently, as concerns about Saemaeul Geumgo’s insolvency risks have emerged, some lawmakers’ offices have begun reviewing related laws.

Financial consumers worry every time an article about Saemaeul Geumgo appears, wondering, 'Is the money I entrusted safe?' If Saemaeul Geumgo is to become a leading domestic financial institution for ordinary citizens, as emphasized by the Central Association, financial authorities must take charge of supervision and inspection this time. Similarly, loan businesses were originally managed by local governments but were transferred to financial authorities for supervision and inspection.