[Asia Exclusive] Kim Yunsik: "Perceptions and Regulations of Mutual Finance Must Change 180 Degrees"

Interview with Kim Yunsik, President of the National Credit Union Federation of Korea
"Establishing a Cooperative Agency with the Spirit of Upholding Tradition and Innovation"
Focus on Breaking Away from MOU in Remaining Term

Kim Yoon-sik, Chairman of the National Credit Union Federation of Korea, is conducting an interview with Asia Economy on the 25th. Photo by Kang Jin-hyung

[Interview = Reporter Kwangho Lee, Summary = Reporter Seungseop Song] "A ‘Cooperative Agency’ must be established so that the fragmented mutual finance sectors can operate in a unified manner. Large cooperatives in the U.S. and Europe bundle policies and regulations that are divided by each cooperative to generate reasonable profits. It must be born with the spirit of ‘Bupgochangsin (法古創新·learning from the old to create the new).”

Kim Yoonsik, Chairman of the National Credit Union Federation of Korea (NACUFOK), which leads credit unions, mentioned this in an interview with Asia Economy, emphasizing that perceptions and regulations regarding mutual finance must change 180 degrees. Since the mutual finance sector shares the common form of cooperatives, Chairman Kim believes that a Cooperative Agency should be created to apply uniform regulations and policies.

Currently, the mutual finance industry has different managing authorities and legal bases for each cooperative. The Financial Services Commission oversees credit unions, the Ministry of Agriculture, Food and Rural Affairs manages the Nonghyup, the Ministry of Oceans and Fisheries supervises the Fisheries Cooperatives, the Korea Forest Service manages the Forestry Cooperatives, and the Ministry of the Interior and Safety oversees the Saemaeul Geumgo.

He said that criticisms about relatively lax regulations in some cooperatives or risks could be reduced by establishing a Cooperative Agency. Chairman Kim stated, "I am telling the government and financial authorities that a Cooperative Agency should be created to generate synergy effects," and emphasized, "If there are policies for ordinary people and they are right, they must be boldly implemented."

He is determined to focus all efforts on breaking away from the management improvement order memorandum of understanding (MOU) signed with the government during the remaining five months of his term until February next year. During the IMF foreign exchange crisis, credit unions suffered deficits by absorbing cooperative insolvencies and signed an MOU after receiving government support in 2007. The MOU expires in 2024, and the credit unions are still under management intervention by financial authorities.

Chairman Kim said, "Credit unions have recorded profits for seven consecutive years, completely eliminated accumulated losses over 17 years, and by the end of last year, accumulated retained earnings of 861.6 billion KRW, with the BIS ratio reaching 9.94%, significantly improving capital adequacy." He expressed his determination, saying, "We established a complex product investment organization and strengthened the investment management sector to have a stable revenue structure including bonds, stocks, and real estate."

No Reason Not to Break Away from MOU... Will "Actively Cooperate and Specially Manage" Loan Caps

Kim Yoon-sik, Chairman of the National Credit Union Federation of Korea, is conducting an interview with Asia Economy on the 25th. Photo by Kang Jin-hyung

He explained that mid-term management stabilization plans and blueprints have also been prepared after the MOU is lifted. Upon MOU termination, services to member cooperatives will be dramatically improved, and support for cooperative management will be strengthened through dividends on utilization and capital contributions. Part of the central federation’s business profits will be used as resources to support social economy organizations, expanding assistance to small business owners, self-employed individuals, and financially marginalized groups.

Chairman Kim said there is no reason to wait for the MOU termination as preparations are complete. He stated, "Through consultations with related agencies such as the Ministry of Economy and Finance and the Financial Services Commission in the second half of the year, we aim to lift the MOU in a way that benefits both the central federation and member cooperatives," and pledged, "Having prepared since my first year in office, now that I am nearing the end of my term, I will definitely resolve this within this year."

When asked what regulatory reforms local field cooperatives want, he answered, "The same-person limit regulation." The same-person regulation is a law enacted to prevent financial institutions from excessively concentrating loans to a specific individual. The mutual finance sector is subject to relatively strict same-person regulations. Recently, Chairman Kim toured cooperatives nationwide to listen to the difficulties of regional credit unions.

He said, "There were many requests from employees of agricultural and small cooperatives to find ways to survive," and "They expressed various difficulties regarding loans (credit)." He added, "Agricultural and small cooperatives located in regions where economic crises have begun due to aging and population decline have low loan demand and find it difficult to meet regulations," and "Under current standards, some small cooperatives with small asset sizes have same-person limits as low as 200 to 300 million KRW, which is challenging."

He also shared his thoughts on regulatory issues currently being discussed in the mutual finance sector. Chairman Kim analyzed, "The large loan limit regulation overlaps with the already applied same-person regulation," and "Creating a new large loan limit is an excessive overlapping regulation." He predicted, "If corporate loans, which make up most large loans, shrink, some mutual finance institutions will inevitably expand aggressive household loans, resulting in a surge in loans."

However, he forecasted that they will actively cooperate with the government and financial authorities’ ongoing loan regulations and that sufficient control will be possible. Chairman Kim said, "Among mutual finance institutions, credit unions are the only ones with a decreasing trend in household loans," and added, "We are specially managing household loan totals periodically by regional headquarters and continuously requesting loan adjustments through video conferences with cooperative operational managers."

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