Ministry of the Interior and Safety Conducts Focused Sector Inspection on Regional Saemaeul Geumgo... Emphasis on Loan Loss Provisions

Key Focus on Adequacy of Allowance for Doubtful Accounts and Related Inspections

The Ministry of the Interior and Safety will launch an intensive sector inspection of local Saemaeul Geumgo starting next month.

On the 6th, the Ministry announced that this year’s sector inspections of Saemaeul Geumgo will focus on the adequacy of loan loss provisions, the scale of joint loans and corporate loans, among other aspects.

Previously, to address criticisms that sector inspections had been conducted only formally, the Ministry established the "Saemaeul Geumgo Management Innovation Plan" last year, which included tasks such as "focusing inspection capabilities and expanding sector inspections." Sector inspections are conducted by the National Saemaeul Geumgo Federation on specific tasks, such as certain business areas, verification of corrective actions on major issues, and tasks with a high frequency of incidents.

MG Saemaeul Geumgo branch in a market in Seoul. Photo by Huh Younghan younghan@

The Ministry will select target Geumgo for sector inspections by analyzing various data related to individual Geumgo in advance. The full-scale sector inspections will be conducted from next month through December.

The main focus areas of this sector inspection are broadly divided into four categories: adequacy of loan loss provisions, scale of corporate and joint loans, scale of out-of-region loans, and organizational culture and operation of internal control systems.

The Ministry plans to examine whether individual Geumgo properly accumulate loan loss provisions to enhance their loss absorption capacity in preparation for crises such as non-performing loans. This is part of follow-up measures to the revised "Saemaeul Geumgo Supervision Standards," which gradually expanded loan loss provision requirements. The entire process of loan loss provision accumulation will be closely scrutinized starting from the asset soundness classification stage.

Geumgo with a high proportion of corporate and joint loans will be guided and inspected on ways to reduce these proportions through the inspection. Until 2017, the proportion of corporate loans in Saemaeul Geumgo was less than 10%, but it increased to over half last year.

Through this sector inspection, the Ministry aims to reduce the proportion of corporate loans and ensure that Saemaeul Geumgo fulfills its original role as a financial institution supporting local residents and small business owners.

Local Geumgo must maintain the proportion of out-of-region loans at one-third or less of total loans. During this inspection, Geumgo violating this will be subject to corrective measures and disciplinary actions if necessary. Additionally, Geumgo where internal control systems are not functioning properly, such as workplace harassment, will first undergo a soundness inspection.

Ko Gi-dong, Vice Minister of the Ministry of the Interior and Safety, stated, "We hope that Saemaeul Geumgo will actively respond to risks such as loan loss provision accumulation and excessive joint loans through sector inspections to regain public trust," and added, "We will support the prompt implementation of the tasks presented in the Saemaeul Geumgo Management Innovation Plan."

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