Shinhyeop TF, 9 Months Since Launch... When Will the Cooperative Mutual Growth Plan Be Released?

Shinhyeop TF with Over 100 Cooperatives Discusses Win-Win Plans Since May Last Year
Considering Measures Such as Expanding Existing Systems and Strengthening Office Installation Standards
Large Cooperatives Growing Larger While Small Cooperatives Sometimes Shrink

[Asia Economy Reporter Song Seung-seop] The National Credit Union Federation of Korea (NACUFOK) has been unable to come up with a clear win-win plan for nine months in the task force (TF) formed to prevent side effects from the expansion of the loan area. Attention is focused on whether a clear measure to prevent the gap between large and medium-small credit unions will emerge.

9 Months Since TF Launch... When Will the Win-Win Plan Come Out?

According to the financial sector on the 1st, the Joint Credit Union Regionalization TF under NACUFOK was launched in May last year. The TF is a consultative body with about 100 credit unions participating, including around 80 small unions, discussing win-win measures among the unions. Although more than nine months have passed since discussions began, no concrete win-win plan has been derived.

The TF was initiated to prevent the widening gap between credit unions following regulatory easing by the Financial Services Commission (FSC). Credit unions had to conduct more than two-thirds of their total loans within city, county, or district boundaries, but the FSC expanded this to 10 nationwide regions. From this year, free lending to non-members within these regions became possible. At the time, the industry was concerned that the expanded loan handling areas would lead to capital concentrating in large credit unions with strong financial power.

Currently, the TF is focusing on reviewing the expansion of the linked loan system and performance product system. The linked loan system refers to a system that intermediates loan demanders to small and medium-sized enterprises, and performance products refer to products that entrust funds from small credit unions, operate them on their behalf, and distribute profits. The leading credit union system, which connects large and medium-small credit unions, is also under discussion.

However, the linked loan system and performance products have been in operation since November last year, and the leading credit union system has been in place since 2014. This means the TF has not gone far beyond utilizing existing alternatives, and no specific implementation date has been set. This is why there is skepticism about whether the growing gap between credit unions can be resolved.

Initially, NACUFOK planned to discuss limiting the total number of offices per credit union, prioritizing support for small credit unions’ market entry, and strengthening branch office installation requirements. NACUFOK stated, “We are discussing these measures to refine and implement them more thoroughly.” They also added that in January, they implemented win-win development policies by relaxing office installation standards for agricultural and small credit unions while strengthening them for other unions.

Widening Gap Among Cooperative Credit Unions

The gap among credit unions is widening. According to the Financial Supervisory Service’s Financial Statistics Information System, from June 2018 to June last year, larger credit unions saw their assets and deposits grow rapidly.

In Seoul, the largest credit union, Eunpyeong Union (assets of 460 billion KRW), increased its assets by more than 25% during this period. The second largest, Dunsol Union (432.4 billion KRW), grew by 17%. In contrast, smaller capital unions such as Gyeongnam Samsung Gongjo Union (944 million KRW) and Jeonnam Joseong Union (18.2 billion KRW) shrank by 9.95% and 1.12%, respectively.

Deposits also increased significantly in Seoul, where many large credit unions are located, growing by an average of 8.22% every half year, totaling a 35.19% increase. Regions with many medium-small credit unions, such as Ulsan (0.57%) and Jeonbuk (3.66%), saw only slight increases in deposits. Gyeongnam, which had the lowest average growth rate (-1.27%), saw total deposits decrease by 5.48%, widening the deposit gap with Seoul from 1.6572 trillion KRW to 2.2731 trillion KRW.

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