Shinhyup Loan Expansion... Industry on Edge

Amendment to the Credit Union Act Failed
But Loan Areas Expanded Nationwide

[Asia Economy Reporter Kim Min-young] The partial amendment to the Credit Cooperatives Act, which aimed to expand the operational areas of credit unions, failed to pass the National Assembly. However, during the legislative process, the Financial Services Commission agreed to expand the loan areas, allowing credit unions to achieve "half the income."

According to financial and political sources on the 21st, the National Assembly's Legislation and Judiciary Committee postponed the amendment bill to expand the operational areas of credit unions at its plenary session the day before. Since the last plenary session of the 20th National Assembly was held that afternoon, the bill is effectively set to be automatically discarded.

The core of the amendment was to broaden the common bond (operational area), which is the basis for establishing and joining cooperatives, from the current 226 cities, counties, and districts to 10 nationwide regions.

Credit unions requested to divide the country into 10 regions, including Seoul, Incheon-Gyeonggi, Busan-Ulsan-Gyeongnam, and Daegu-Gyeongbuk, to conduct their operations, but the Financial Services Commission opposed the amendment, citing fairness with other mutual financial sectors such as Nonghyup, Suhyup, and Saemaeul Geumgo.

Financial and political circles also expressed concerns about side effects such as monopolization by a few large cooperatives. A financial sector official said, "If multiple regional cooperatives are established based on the same city or province, competition among regional cooperatives may intensify, or monopolization by a few large cooperatives may occur."

Although the amendment failed to pass, credit unions achieved the expansion of loan (credit) operations. Financial Services Commission Chairman Eun Sung-soo stated at the Legislation and Judiciary Committee the day before, "We will amend the enforcement decree of the Credit Cooperatives Act to maintain the current scope of deposit-taking but expand the loan area for credit unions."

Credit unions breathed a sigh of relief. A representative from the National Credit Union Federation of Korea said, "It is truly fortunate that the 30-year-long wish to expand the loan area, which is essential for the survival and financial soundness of credit unions, is expected to be realized. In particular, urban hollowing-out areas, agricultural and fishery cooperatives, and small cooperatives will be able to expand their activity areas, enabling credit union services even in neglected regions."

The representative also stated, "Excessive competition among large, medium, and small cooperatives will be addressed through a common bond area task force (TF) with balanced participation from cooperatives nationwide, and the federation will seek the optimal operational plan for all cooperatives to coexist."

Other sectors competing with credit unions are on edge. Currently, Saemaeul Geumgo can conduct loan operations in nine regions, including Seoul, Incheon-Gyeonggi, Busan-Ulsan-Gyeongnam, and Daegu-Gyeongbuk, and savings banks operate nationwide divided into six regions. An industry official said, "If urban areas like Seoul or existing high-quality cooperatives rapidly expand their loan operations, they could grow to a level where they can compete with medium and large savings banks."

This content was produced with the assistance of AI translation services.