Shinhyup Expands Influence... Increased Competition in Mutual Finance Sector (Comprehensive)

Passage of Credit Union Act Amendment to Expand Business Areas Fails
Financial Services Commission Decides to Expand Loan Business Areas Instead
Growing Large Credit Unions to Compete with Other Mutual Finance Companies

[Asia Economy Reporter Kim Min-young] As the loan territory of credit cooperatives (Shinhyup) expands from the existing city, county, and district level to a nationwide scale, the savings bank industry and other mutual finance companies are becoming increasingly tense. Although the revision of the Shinhyup Act failed due to concerns about fairness with other industries and the monopolization by some cooperatives, Shinhyup, which secured a "half income" through the nationwide expansion of the loan business area, may now expand its influence.

According to the financial and political sectors on the 21st, the National Assembly's Legislation and Judiciary Committee postponed the revision bill to expand Shinhyup's business area at the plenary meeting held the day before. Since the last plenary session of the 20th National Assembly was held that afternoon, the bill is expected to be automatically discarded.

The amendment aimed to broaden the common bond (business area), which is the basis for cooperative establishment and membership, from the current 226 cities, counties, and districts to 10 nationwide regions. Shinhyup requested to divide the country into 10 regions such as Seoul, Incheon-Gyeonggi, Busan-Ulsan-Gyeongnam, Daegu-Gyeongbuk, etc., to conduct deposit and loan business activities. On the other hand, the Financial Services Commission opposed the amendment citing fairness with other mutual finance sectors such as agricultural and fisheries cooperatives and Saemaeul Geumgo. There were also 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." Ultimately, the Legislation and Judiciary Committee accepted the arguments of some lawmakers and financial authorities, resulting in the failure of the amendment's passage.

However, Shinhyup achieved the outcome of broadening the loan business area. Eun Sung-soo, chairman of the Financial Services Commission, said at the Legislation and Judiciary Committee, "We will revise the enforcement decree of the Shinhyup Act to keep the deposit scope unchanged but expand the loan area."

Shinhyup breathed a sigh of relief. A Shinhyup Central Association official said, "It is fortunate that the 30-year-long wish to expand the loan area, which is essential for Shinhyup's survival and improvement of financial soundness, is expected to be realized," adding, "Especially, urban hollowing-out areas, rural cooperatives, and small cooperatives will be able to expand their activity areas, enabling services even in neglected regions."

The official 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 Central Association will find the optimal operation plan for all cooperatives to coexist."

Meanwhile, other industries are on edge. Currently, Saemaeul Geumgo can conduct loan business in nine regions including Seoul, Incheon-Gyeonggi, Busan-Ulsan-Gyeongnam, and Daegu-Gyeongbuk, and savings banks operate nationwide divided into six regions. An industry insider expressed concern, saying, "If urban areas like Seoul or existing high-quality cooperatives rapidly expand their loans, they could grow to a level where they compete with medium and large savings banks in the future."

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