Shinhyeop Central Association Allowed to Sell RP to Bank of Korea Without Prior Approval

NACUFOK Can Now Secure Liquidity from the Bank of Korea Without Prior Approval
Amendment Also Allows Additional Reserves for Depositor Protection Fund

The National Credit Union Federation of Korea (NACUFOK) will no longer need prior approval from financial authorities when selling repurchase agreements (RPs) to the Bank of Korea to secure liquidity. Accordingly, in the event of an urgent liquidity crisis, credit unions can quickly receive liquidity support from the Bank of Korea.

On the 11th, the Financial Services Commission announced that the amendment to the Enforcement Decree of the Credit Cooperatives Act, containing this provision, was approved at the Cabinet meeting. The enforcement decree is scheduled to take effect on the 18th (tentative).

Currently, NACUFOK must obtain approval from the Financial Services Commission when borrowing funds, and exemptions from approval are limited to cases specified by presidential decree. However, the amendment allows NACUFOK, like other mutual finance central associations, to raise funds by selling RPs to the Bank of Korea without prior approval from the Financial Services Commission.

The amendment also includes provisions allowing the NACUFOK Depositor Protection Fund to make additional reserves even after reaching its target reserve amount. Currently, NACUFOK sets upper and lower limits for the target reserve amount of the Depositor Protection Fund, and when the upper limit is reached, member contributions (insurance premiums) are exempted, which has prevented flexible formation of the Depositor Protection Fund in response to market conditions.