[2024 National Audit] Kim Byunghwan "Saemaeul Geumgo Supervision Remains... Mutual Finance Reserves Under Review"

Kim Byung-hwan, Chairman of the Financial Services Commission, drew a line on the proposal to transfer supervisory authority over Saemaeul Geumgo from the Ministry of the Interior and Safety to the Financial Services Commission, saying it is too early to discuss. Regarding concerns that the burden of loan loss provisions related to real estate project financing (PF) within the mutual finance sector is increasing, he stated that a decision would be made based on simulation results.

On the 24th, during the National Assembly's Political Affairs Committee audit, in response to a question from Kang Myung-gu, a member of the People Power Party, asking whether the management and supervision of Saemaeul Geumgo should be transferred from the Ministry of the Interior and Safety to the Financial Services Commission, Chairman Kim replied, "There are still issues to be resolved such as real estate PF, so it is not yet the stage to discuss the entire system."

Earlier, at the personnel hearing in July, Chairman Kim also mentioned, "Saemaeul Geumgo is currently in an unstable situation, and if the supervisory authority of the Ministry of the Interior and Safety is tampered with, it could cause confusion. Stabilizing through a collaborative system should be the priority." The Financial Services Commission is establishing a dedicated supervisory organization jointly with the Financial Supervisory Service and the Korea Deposit Insurance Corporation as part of a government-wide response, and is promoting joint inspections in consultation with the Ministry of the Interior and Safety.

Regarding criticisms that some executives of Saemaeul Geumgo exhibit serious moral hazard, Chairman Kim explained, "Since the recent Saemaeul Geumgo bank run (massive withdrawal of deposits) incident, related agencies have been moving toward tighter management and supervision."

Financial Services Commission Chairman Kim Byung-hwan is attending the comprehensive audit of the Financial Services Commission and the Financial Supervisory Service held at the National Assembly's Political Affairs Committee on the 24th. Photo by Kim Hyun-min

Additionally, Chairman Kim said that they would consider deferring the burden of loan loss provisions on mutual finance companies. Mutual finance institutions are required to set aside loan loss provisions related to real estate and construction loans at a level of 120% by the end of this year, and this figure must be increased to 130% by the end of the first half of next year, six months later.

Assemblyman Kang said, "NongHyup Central Association needs about 300 billion won to meet the 120% provision requirement by December," adding, "While the amount is significant, meeting the deadline is challenging, and the number of deficit cooperatives may increase, so it would be worth considering an extension of the additional provisioning deadline." Furthermore, Kang Min-guk of the People Power Party and Kang Jun-hyun of the Democratic Party, both secretaries of the Political Affairs Committee, also suggested the need to ease the burden of loan loss provisions on the mutual finance sector.

In response, Chairman Kim said, "I think the risk of real estate and construction loans is high and there are parts that have not been properly managed, so from a soundness perspective, the provisions should be increased. However, I will examine whether this is a tolerable level in reality and on the ground," adding, "Since this involves changing supervisory policies, I will carefully review whether it might lead to laxity in soundness supervision before making a judgment."

He continued, "I have heard many such concerns (about difficulties in the mutual finance sector)," and said, "We will conduct simulations to see the actual impact on individual mutual finance companies and make a decision based on the results. Since both secretaries have spoken, I will look into this more diligently."

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