30 Years for Saemaeul Geumgo Full Inspection?... Ongoing Incidents Due to Poor Supervision (Comprehensive)

1,300 Safes with Individual Chairpersons
Ministry of the Interior and Safety Conducts On-Site Inspections at up to 40 Locations Annually
Staff Shortages Lead to Oversight Blind Spots... Increase in Incidents and Accidents

Asia Economy DB

[Asia Economy Reporter Kim Min-young] The approximately 1,300 regional Saemaeul Geumgo (Community Credit Cooperatives) have been marred by incidents and accidents, increasing calls for strengthened management and supervision. Regional Geumgo are independent corporations with separate chairpersons holding actual authority, so the control of the Saemaeul Geumgo Central Association, the federation of Geumgo, does not reach the root level. Additionally, financial authorities lack inspection authority, leading to serious moral hazard issues in supervisory blind spots.

According to the Saemaeul Geumgo Central Association on the 23rd, 18 cases of misconduct have been detected in regional Geumgo this year. The detected cases vary, including embezzlement, misappropriation of funds, sexual harassment, and intentional non-registration of mortgage liens.

Embezzlement as a baseline, plus misappropriation, document forgery, and sexual harassment

An employee at a Geumgo in Chungcheongbuk-do was dismissed after being caught embezzling customers' deposits, savings, and insurance contract loans. This employee violated not only the Saemaeul Geumgo bylaws but also committed serious crimes under criminal law such as forgery and alteration of private documents and embezzlement in the course of duty. Another employee in Gyeongsangnam-do was also dismissed; this employee took out a secured loan under a family member's name but deliberately did not register a mortgage lien on the collateral. This was to prevent the Geumgo from exercising collateral rights even if a default occurred. The employee also illegally destroyed documents used in the crime, fearing exposure of the misconduct.

Another employee at a Geumgo in Chungbuk was dismissed for arbitrarily withdrawing money deposited in the Geumgo and issuing false deposit passbooks, violating the Financial Real Name Act. An employee in Busan who received a suspension penalty committed sexual harassment and workplace bullying and also showed poor attendance, including leaving the workplace without permission.

Other Geumgo executives and employees were disciplined for errors such as overvaluing collateral for loans either accidentally or intentionally, or executing loans with strong illegality.

The continuous incidents and accidents at Geumgo are due to the absence of a supervisory system that can closely examine the Geumgo. Although there is a Geumgo Supervisory Committee under the Central Association, it is pointed out that there are limits to overseeing all Geumgo. The committee has about 140 employees.

Comprehensive inspection team organized under the Ministry of the Interior and Safety... but limited as it is not under financial authorities

In particular, the fact that it belongs to the Ministry of the Interior and Safety and is not directly controlled by financial authorities is cited as one reason for poor management. A joint inspection team dispatched from the Ministry of the Interior and Safety and financial authorities inspects the Central Association departments once every two years. Regional Geumgo are also selectively inspected annually, but the number of Geumgo is too large in reality. A Central Association official explained, “The government joint inspection team (including 4-5 Central Association employees) conducts inspections on 30-40 Geumgo per year.” The Central Association stipulates that each Geumgo should be inspected once every two years, but even if the inspection team visits 40 places a year, it would take 32 years to inspect all 1,300 Geumgo. In fact, the supervisory system for Geumgo is minimal.

Similar mutual financial institutions such as credit unions, fisheries cooperatives, and forestry cooperatives are regularly and irregularly inspected by the Financial Services Commission and the Financial Supervisory Service.

As seen in the recent case of Aegis Asset Management’s full loan on a Gangnam apartment, Geumgo appear to seriously disregard financial authorities’ loan regulations. Also, although the Central Association ordered seven Geumgo that lent 27 billion KRW to Aegis to recover the loans, the regional Geumgo reportedly argued, “Since the loan was a business loan to the corporation (Aegis) secured by land, it does not violate the loan-to-value ratio (LTV) for housing mortgage loans.” They are not only violating government policy but also ignoring the Central Association’s order to recover the loans. The Central Association stated, “Besides this Aegis case, we have started investigating large loan cases to see if there are more violations of loan regulations.”

As of the end of last month, the total assets of Saemaeul Geumgo reached 199.9212 trillion KRW, nearing the 200 trillion KRW mark. There are 1,300 Geumgo and 3,225 branches. The number of members reaches 20.64 million, meaning about one in two adult citizens aged 19 and over (approximately 43 million) is a member.

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