[Exclusive] Illegal Loans Persist at Sinhyeop and Nonghyup... Excess Loan Amounts to 500 Billion Won

Repeated Embezzlement and Breach of Trust Incidents
'Shinhyup' Leads in Loan Regulation Violations
'Nonghyup' Has the Most Embezzlement Cases

It has been revealed that illegal loans violating regulations have been continuously occurring in the mutual finance sector. Over the past five years, the amount of excess loans issued by Credit Unions, Nonghyup, and Suhyup has exceeded 500 billion KRW. Issues of embezzlement and breach of trust by executives and employees have also been persistently occurring.

According to data on 'Mutual Finance Sector (Credit Unions, Nonghyup, Suhyup) Disciplinary Actions' obtained by Asia Economy on the 10th through the office of Hong Seong-guk, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, there were 70 cases of illegal loans sanctioned in the mutual finance sector over the five years from 2018 to August of this year. Credit Unions accounted for the most with 39 cases, followed by Nonghyup with 28 cases, and Suhyup with 3 cases.

Illegal loans in the mutual finance sector refer to violations such as exceeding the loan limits for the same individual, executives and employees, and non-members. For example, under the Credit Union Act, the loan limit for the same individual must be handled within 20% of the capital and 1% of total assets. Regarding non-member loan limits, according to the Credit Union Act, loans handled in the relevant fiscal year cannot exceed one-third (for Nonghyup, one-half). The regulations of other mutual finance sectors are generally similar. If these laws or internal regulations of each union are violated, the Financial Supervisory Service imposes disciplinary actions such as warnings or cautions. Additionally, the excess loan amounts are subject to recovery measures.

By violating laws and regulations and allowing excess loans, it was found that over 500 billion KRW was additionally loaned over the past five years. From 2018 to August of this year, the excess loan amounts of Credit Unions, Nonghyup, and Suhyup totaled 502.3 billion KRW. Credit Unions accounted for the largest portion with 378.3 billion KRW, followed by Nonghyup with 119.5 billion KRW, and Suhyup with 4.5 billion KRW. In particular, last year, Credit Unions were found to have exceeded the non-member loan limit by more than 200 billion KRW. This year, Credit Unions also recorded an excess loan amount of 35.9 billion KRW.

Issues of embezzlement and breach of trust by executives and employees in the mutual finance sector have also been continuously occurring. This year, as of August, there were 29 cases of embezzlement and breach of trust incidents in Credit Unions, Nonghyup, and Suhyup, nearly matching the 31 cases that occurred throughout last year. Regarding embezzlement, Nonghyup had the most cases with 17, followed by Credit Unions with 9, and Suhyup with none. For breach of trust, there were no cases in Credit Unions or Suhyup, whereas Nonghyup had 3 incidents.

From 2018 to August of this year, approximately 145 embezzlement incidents occurred in Credit Unions, Nonghyup, and Suhyup over about five years. Nonghyup had the highest number of embezzlement incidents with 77 cases, followed by Credit Unions with 58 cases, and Suhyup with 10 cases. The total embezzled amount was 28.3 billion KRW, with Nonghyup accounting for 16.9 billion KRW, Credit Unions 6.3 billion KRW, and Suhyup 5.1 billion KRW.

Regarding this, Representative Hong stated, "Since trust is the fundamental premise of finance, illegal loans and embezzlement incidents are fatal no matter how small the amount," and added, "For the mutual finance sector, which has supported low-income finance and the local economy, to gain greater trust in the future, special efforts must be made to strengthen internal controls."