Chairman Park Cha-hoon's Risk... Challenges Pile Up for Saemaeul Geumgo

Park Cha-hoon, chairman of the National Credit Union Federation of Korea, suspected of receiving money and valuables during the fund investment process, is seen entering the Seoul Eastern District Court on the afternoon of the 8th to undergo a pre-arrest detention hearing. Photo by Yonhap News

Saemaeul Geumgo, which narrowly avoided a bank run (mass withdrawal of deposits) crisis, is now facing continuous setbacks as leadership risks have emerged. The government is also considering the formation of an Emergency Management Committee for Saemaeul Geumgo.

According to the financial sector on the 9th, Park Cha-hoon, the chairman of the Saemaeul Geumgo Central Association, has avoided detention for now, but concerns about a management vacuum at the Saemaeul Geumgo Central Association remain depending on whether he will be indicted and tried in the future. The prosecution stated that after the detention warrant for Chairman Park was dismissed the day before, they are considering reapplying. A prosecution official said, "It is not balanced that a Saemaeul Geumgo employee who received a much smaller amount than the suspect was detained and indicted and recently sentenced to prison," adding, "We will review whether to reapply for the warrant."

Currently, Chairman Park is under suspicion of having his legal fees paid by a private equity fund invested in by the Saemaeul Geumgo Central Association. He was previously indicted for distributing holiday gifts and golf course vouchers to delegates ahead of the 2018 Saemaeul Geumgo Central Association chairman election but maintained his position after receiving a fine. The prosecution believes that the private equity fund, which received investment from Saemaeul Geumgo, paid tens of millions of won to Park’s lawyer as consulting fees, effectively covering his legal expenses. The prosecution has been investigating allegations that the Saemaeul Geumgo Central Association received kickbacks during the private equity fund investment and project financing (PF) loan processes and provided preferential treatment to certain companies.

Celebrating its 60th anniversary this year, Saemaeul Geumgo is going through serious turmoil. Following the emergence of concerns about PF loan-related insolvency risks in March, news of a sharp increase in delinquency rates last month triggered a bank run crisis. Saemaeul Geumgo struggled to manage the situation. Although deposit balances have gradually recovered and stabilized since then, new allegations of preferential treatment in fund investments have surfaced, with high-ranking officials from Ryu Hyuk, head of Saemaeul Geumgo Central Association’s Credit Guarantee, to Chairman Park being repeatedly mentioned.

Many point out that the continuous noise surrounding Saemaeul Geumgo stems from the structure of the Saemaeul Geumgo Central Association. The chairman is elected by delegates from among frontline branch heads, making strict internal control practically difficult. A financial sector official said, "Even if someone is at the central association, they can return to being a branch head, so it’s a structure where strong supervision is not possible," adding, "Because the mutual finance system is originally like this, there are ongoing discussions about changing the supervisory authority."

Meanwhile, although the outflow of funds has calmed down again, the emergence of judicial risks has led the government to reportedly consider establishing an 'Emergency Management Committee' (tentative name). This organization is likely to be composed of related ministries and agencies, including the Ministry of the Interior and Safety as the main body, the Financial Services Commission, and the Financial Supervisory Service. A Ministry of the Interior and Safety official said, "We are reviewing it as a way to support emergency management."

In this regard, the Saemaeul Geumgo Central Association stated that there is no situation that customers need to worry about significantly. A Saemaeul Geumgo Central Association official said, "Deposit inflows have stabilized, and there will be little impact on the system."

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