Proactive Reforms in Risk Management, Lending, and Governance
Declaring a Shift from Community Finance to the Core of Social Solidarity Finance
Saemaeul Geumgo is accelerating its efforts to improve its financial structure by proactively adopting reforms in the mutual finance sector. The organization aims to overcome the trust crisis that emerged after past withdrawal incidents through institutional innovation, thereby reinforcing its fundamental role as a regional and community-based financial institution.
The National Credit Union Federation of Korea recently announced that it will actively implement mutual finance system improvements discussed in a consultative body with financial authorities, under the guidance and cooperation of the Ministry of the Interior and Safety. The Federation also stated its commitment to continuously refine its systems to enhance both soundness and transparency.
On December 22, Saemaeul Geumgo participated in the Mutual Finance Policy Council, chaired by the Vice Chairman of the Financial Services Commission, to discuss "measures to improve the mutual finance system." The council identified several key tasks: strengthening the Federation's risk management capabilities, advancing the soundness management of individual unions, improving the loan portfolio, and enhancing governance and internal controls.
Notably, many of these reforms have already been proactively introduced through Saemaeul Geumgo's internal regulations and laws. The plan to raise the minimum net capital ratio for individual unions to 4% has already been implemented under the organization's regulations. In addition, the mandatory prior review by the Federation for large-scale joint loans related to real estate risk management was included in internal policies last year as part of management innovation measures. Currently, joint loans exceeding 7 billion won require prior review by the Federation, and those exceeding 20 billion won mandate participation by the Federation.
Saemaeul Geumgo is also among the fastest in the mutual finance sector to improve governance. In 2023, it became the first in the sector to introduce a "regulation to prevent circumvention of term limits," designed to block the de facto long-term tenure of chairpersons (cooperative heads). Under this rule, if a chairperson resigns within two years before the end of their term or is reappointed within two years after their term ends, it is considered a consecutive term. This measure strengthens the fairness and accountability of cooperative management.
The direction for future reforms is also clear. To enhance risk management at the Federation level, the organization plans to gradually raise its capital adequacy ratio. The current management guidance ratio of 5% will be increased to 6% in 2026, 6.5% in 2027, and 7% in 2028, aligning with the standards of savings banks. At the same time, the internal control system will be comprehensively strengthened, including computerization of the loan process, to fundamentally prevent improper and fraudulent loans.
Efforts are also underway to improve the real estate-centered lending practices. When calculating the net capital ratio, a 110% risk weight will be applied to loans for real estate and construction sectors, and project finance (PF) loans will be capped at 20% of total loans. In addition, to increase transparency in operations, the Federation will work with the Ministry of the Interior and Safety to implement mandatory appointment of full-time auditors and strengthen external accounting audit systems.
Saemaeul Geumgo intends to use these reforms not only as a means of risk management but also to expand the social role of finance. The goal is to move beyond competition-driven finance and establish itself as a core institution of "social solidarity finance," supporting solutions to social issues and self-reliance based on solidarity and recovery.
Kim In, Chairman of the National Credit Union Federation of Korea, stated, "We are working with the Ministry of the Interior and Safety and financial authorities to fundamentally improve our structure in order to fully perform our role as a community financial institution. We will continue to strive to become a trusted financial institution that provides real support to local communities and the grassroots economy."
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