Saemaeul Geumgo Shifts to Professional Management System... Rapid Merger of Insolvent Geumgo (Comprehensive)

Saemaeul Geumgo to Unveil 'Management Innovation Plan' on 14th
Reduce Central Association President's Authority, Establish CEO Position
Strengthen Geumgo Supervision... Expand Financial Supervisory Service Inspection Participation
Rapid Restructuring of Insolvent Geumgo

Kim Seong-ryeol, Chairman of the Saemaeul Geumgo Management Innovation Advisory Committee, is holding a joint briefing on the Saemaeul Geumgo management innovation plan on the 14th at the Government Seoul Office in Jongno-gu, Seoul, together with Choi Byung-kwan, Director General of Local Finance and Economy at the Ministry of the Interior and Safety, and Shin Jin-chang, Director of the Financial Industry Bureau at the Financial Services Commission. Photo by Jo Yong-jun jun21@

Saemaeul Geumgo announced on the 14th that it will introduce a professional management system and strengthen supervision. The central association president's term will change from the current renewable system to a single four-year term, and a new position of CEO will be established. Additionally, the Financial Supervisory Service's participation in inspections of Saemaeul Geumgo will be expanded, and insolvent Geumgo will be swiftly restructured and merged.

The Saemaeul Geumgo Management Innovation Advisory Committee announced management innovation measures at the government Seoul office in the afternoon. The innovation plan consists of three major areas: governance and management innovation, strengthening Geumgo supervision system, rationalizing Geumgo management structure and enhancing depositor protection, with 10 core tasks, 29 basic tasks, and 72 detailed tasks.

Saemaeul Geumgo has faced continuous financial incidents such as embezzlement, and in July, suspicions of insolvency in some Geumgo led to a bank run crisis. In response, the Management Innovation Advisory Committee was launched in August to initiate reforms.

Reducing Central Association President’s Power... Introducing Professional Management System

First, Saemaeul Geumgo plans to decentralize the authority concentrated in the central association president. The positions of executive director and supervisory director will be abolished and reorganized into a 'CEO' who oversees overall operations, introducing a professional management system. The CEO’s term will be two years, with the possibility of extension within two years upon board approval.

The central association president’s term will change from the current renewable system to a single four-year term, limiting duties to external activities and chairing the board of directors. Also, the number of directors who are Geumgo chairpersons will be reduced, while professional directors will be increased.

The number of professional directors will increase from four to eight, and the number of directors who are Geumgo chairpersons will decrease from 13 to eight. If more than one-third of the board requests, convening the board and dismissing executives will be possible. The Geumgo Supervision Committee, previously under the central association president, will be transferred to the central association and granted representative authority for supervision.

Regarding concerns that the central association president chairing the board might influence decisions, Kim Seong-ryeol, chairman of the Saemaeul Geumgo Management Innovation Advisory Committee, explained, "The personnel recommendation committee structure will be completely changed, ensuring fair and objective personnel recommendations," adding, "The board structure will also change, so the chairman of the board will not have the power to decide everything."

On the 6th, a notice regarding 'Protection of Savings and Deposits' was posted at the MG Saemaeul Geumgo Gyeonghuigung Branch in Jongno-gu, Seoul. Photo by Dongju Yoon doso7@

Strengthening Supervision with Financial Supervisory Service and Korea Deposit Insurance Corporation... More Discussion Needed on Transfer of Supervisory Authority

Saemaeul Geumgo plans to reorganize the Geumgo supervision system and strengthen linkage with the Financial Supervisory Service (FSS) to expand supervisory functions. Unlike other mutual financial institutions such as credit unions, agricultural cooperatives, and fisheries cooperatives, which are directly supervised by the FSS, Saemaeul Geumgo has only been subject to joint audits with the FSS upon request by the Ministry of the Interior and Safety, leading to criticism of inadequate management and supervision.

During government joint audits, the role of the FSS, which had been limited to some soundness inspections, will be significantly strengthened to guarantee practical inspection participation through a consultative body composed of the Ministry of the Interior and Safety, FSS, and Korea Deposit Insurance Corporation (KDIC). Participation and cooperation in all inspection tasks, including inspection planning and sanctions, will be ensured to greatly enhance Geumgo inspection functions.

Previously, the Ministry of the Interior and Safety and the central association led inspection planning, but going forward, the consultative body will select Geumgo targets for inspection and establish major inspection plans. Providing materials related to all inspection tasks will be mandatory, and the FSS and KDIC will be able to request ad hoc inspections through the consultative body as needed.

Chairman Kim explained, "Since all matters, including inspection execution and sanction level decisions, will be deliberated by the consultative body, the system will be very different from the current one."

However, regarding transferring supervisory authority over Saemaeul Geumgo to the Financial Services Commission, a clear boundary was drawn. Choi Byung-kwan, director of the Local Finance and Economy Office at the Ministry of the Interior and Safety, said, "Currently, restoring market and public trust in Saemaeul Geumgo is the top priority," adding, "We agreed to first implement the announced innovation plan, and the transfer of supervisory authority requires further discussion with the National Assembly and related ministries."

Strengthening Soundness and Risk Management

Saemaeul Geumgo will also enhance its continuous monitoring system and focus inspection capabilities on high-risk Geumgo such as those with high delinquency rates or large-scale operations.

A direct sanction authority by the Ministry of the Interior and Safety and the Saemaeul Geumgo Central Association over Geumgo employees has been newly established. The central association will expand inspection personnel and operate mobile inspectors for frequent checks on vulnerable areas of Geumgo. The mobile inspectors will gradually hire 60 experts, including retired financial sector inspectors, over three years.

An early warning system to detect signs of insolvency early will be enhanced, and Geumgo showing abnormalities will receive immediate on-site guidance and management. For Geumgo with assets exceeding 300 billion KRW, external audits, currently conducted every two years, will be strengthened to annual audits, and the installation of internal control teams will be expanded.

Soundness and risk management of Saemaeul Geumgo will also be strengthened. Provisions for loan losses will be increased, and liquidity ratio and loan-to-deposit ratio standards will be improved to align with other mutual financial institutions. The Mutual Finance Policy Council, previously chaired by a Financial Services Commission director-level official, has been elevated to be chaired by the vice chairman of the Financial Services Commission at the vice minister level.

To strengthen corporate credit management, which has relatively lax regulations compared to other mutual financial institutions, joint loans exceeding 20 billion KRW will require central association participation, and sector-specific credit limits for real estate and construction industries will be tightened to 30% each, with a combined limit of 50%.

Expelling Insolvent Geumgo... Mergers by First Quarter of Next Year

Saemaeul Geumgo will also promptly promote rationalization of Geumgo management. Geumgo with high delinquency rates or small-scale Geumgo that have lost competitiveness will be designated as 'Geumgo at risk of insolvency' and included in restructuring targets such as mergers. For Geumgo ordered to merge, on-site management guidance will begin.

For Geumgo currently in severe insolvency, such as complete capital erosion, restructuring will be conducted to complete mergers by the first quarter of next year. However, even in mergers, all customer deposits, savings, and equity contributions will be fully guaranteed. Chairman Kim said, "Insolvent Geumgo will be fast-tracked to complete mergers by the first quarter of next year, and other Geumgo with some concerns will be re-evaluated through management status assessments and guidance."

However, the committee did not disclose specific details such as the names or number of Geumgo to be merged by the first quarter of next year. Chairman Kim stated, "Releasing specific information about Geumgo could increase customer anxiety, so we will not disclose it," adding, "However, since we have designed a system that can immediately operate the management system by legalizing the new concept of 'Geumgo at risk of insolvency,' we believe a strong message has been sent that Geumgo at risk of insolvency may be expelled."

Meanwhile, to implement these innovation plans, a 'Saemaeul Geumgo Management Innovation Implementation Task Force' will be established within the Ministry of the Interior and Safety and the Saemaeul Geumgo Central Association starting next year. Additionally, personnel from the FSS and KDIC will be permanently dispatched to the central association, and information will be shared frequently with financial authorities. The implementation status will be reported to the Mutual Finance Policy Council, now elevated to vice minister level, and the results will be disclosed to the public.

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