Saemaeul Geumgo Sets 1.4 Trillion KRW Loan Loss Provisions in H1... "Full Effort on Soundness Management"

"More than last year"
Bond sales also 2 trillion won
"Sufficient retained earnings to cover losses"

The National Credit Union Federation of Korea (Saemaeul Geumgo Joonganghoe) announced on the 21st that it is prioritizing soundness management this year and is actively guiding each Saemaeul Geumgo to sell non-performing loans and additionally set aside loan loss provisions.

To prepare for unexpected shocks, an additional KRW 1.4 trillion in loan loss provisions was set aside in the first half of the year alone. For example, KRW 450 billion was newly provisioned within two months after the financial authorities revised the real estate development project feasibility evaluation.

The total loan loss provisions accumulated by the National Credit Union Federation of Korea amount to KRW 6.8 trillion. This figure surpasses last year's loan loss provisions of KRW 1.2 trillion. The Federation explained that this is the result of intensive management and supervision, including on-site inspections of frontline credit unions in cooperation with the Ministry of the Interior and Safety. Loan loss provisions are reserves that financial institutions set aside in advance to prepare for the possibility that some loan receivables may be difficult to recover. The more provisions set aside, the lower the profits.

In the second half of the year, following the revision of the Saemaeul Geumgo supervisory standards, the increase in loan loss provision ratios and follow-up measures after the revision of project feasibility evaluations will continue. According to the strengthened standards, the National Credit Union Federation of Korea plans to guide and inspect each Saemaeul Geumgo to ensure additional loan loss provisions are set aside without exception.

They also explained that they are actively selling non-performing loans to manage delinquency rates. Since February, delinquency rates have been stably managed. KRW 2 trillion worth of non-performing loans were sold in the first half of the year. Including last year's non-performing loan sales of KRW 2.4 trillion, a total of KRW 4.4 trillion worth of non-performing loans have been cleared. At least KRW 1.2 trillion worth of non-performing loans will be additionally cleared in the third quarter of this year. They will utilize measures such as the activation of light auctions and public auctions promoted by financial authorities to manage soundness.

Regarding retained earnings accumulated until last year, the amount is KRW 8.3 trillion, of which KRW 5.6 trillion consists of special and discretionary reserves that can be used to cover losses, indicating that the response to expected losses is sufficient, according to the National Credit Union Federation of Korea.

A representative of the National Credit Union Federation of Korea stated, “Although losses exceeding KRW 1 trillion seem inevitable due to active loan loss provisioning and non-performing loan sales, the scale of additional reserves for loss coverage is substantial, so the loss scale is considered manageable.” They added, “This year is seen as a process of eliminating latent insolvencies through painful efforts, and we will devote all efforts to soundness management in the second half of the year.”

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