'Aftermath of Special Contract Termination' Bankruptcy Threat and Compensation Proposal... Customers Anxious

[Asia Economy Reporter Bu Aeri] As high-interest special deposit incidents occur in regional agricultural cooperatives, credit unions, and other mutual finance sectors, customer anxiety continues to grow. Some critics argue that the central association's management and supervision are inadequate.

According to the financial sector on the 15th, following the recent incident at Namhae Livestock Agricultural Cooperative, Donggyeongju Agricultural Cooperative is still pleading with customers to cancel their savings accounts. The cooperative conducted a special savings promotion but, due to an accidental opening of non-face-to-face accounts, attracted 900 billion KRW?90 times the original target amount of 10 billion KRW?leading to a bankruptcy crisis. The cooperative's asset size is about 167 billion KRW.

As the cancellation rate among customers remained low, Donggyeongju Agricultural Cooperative proposed an increased compensation plan. They initially announced that if customers canceled, the interest accrued during the deposit period would be compensated at the cooperative's regular deposit interest rate of 5%, but later re-announced compensation at the originally agreed contract interest rate of 8.2%. Hapcheon Agricultural Cooperative, which experienced a similar incident, also raised its compensation offer and is requesting cancellations.

Financial consumers are outraged by the complacent response of the mutual finance sector. A customer, Mr. A, who subscribed to the product, said, "Even though it is a regional agricultural cooperative, the management is too lax," adding, "My trust in savings and deposits in the secondary financial sector has been broken."

Some point out problems with the central association's management and supervision system. In the case of regional agricultural cooperatives, Saemaeul Geumgo, and credit unions, each cooperative is independently operated by its chairman or director, while the central association acts as a kind of control tower. In fact, Donggyeongju Agricultural Cooperative and Hapcheon Agricultural Cooperative, where the special deposit incidents occurred, received a grade 1 in the management evaluation as of the end of June. Namhae Livestock Agricultural Cooperative received grade 2.

However, insiders say it is not easy for the central association to grasp the detailed special deposit situations of each regional cooperative. A mutual finance sector official said, "We understand the special deposit pre-plans, but we do not receive reports on all the detailed parts."

Moreover, the digitalization and IT systems lag behind those of the primary financial sector, which is also problematic. In commercial banks, when the special deposit limit is exhausted, the system automatically notifies employees, but the mutual finance sector still lacks such systems. Another mutual finance sector official said, "Because the system is not as advanced as commercial banks, employees manually open and close special deposit promotions."

As problems continue consecutively, the Financial Supervisory Service (FSS) has stepped in to devise countermeasures. The FSS held a meeting with mutual finance central association deposit managers yesterday and urged strengthening internal controls. Each central association plans to set sales limits for deposits and savings through a special deposit management system and automatically restrict additional sales when limits are exceeded to prevent similar incidents. The FSS also plans to conduct on-site inspections around January next year once the special deposit management system is improved.

Meanwhile, the National Agricultural Cooperative Federation (NACF) stated that it is currently assessing the number of contracts, amounts, and payment status of the affected agricultural cooperatives. A NACF official said, "We continuously provide guidance on precautions for non-face-to-face deposit handling and plan to make this information constantly visible in the system."

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