[Exclusive] Renewed Calls to Transfer Saemaeul Geumgo Supervision... Only Two Specialized Personnel at the Ministry of the Interior and Safety

Lack of Expertise Without Dispatched Personnel
Systemic Limitations Despite Ministry Efforts
"Supervisory System Should Be Centered on Financial Authorities"

A recent case of an improper loan amounting to approximately 180 billion KRW occurred at Saemaeul Geumgo located in Seongnam City, and the involved executives and real estate developers have been sent to the prosecution. Photo by Yonhap News Agency.

While internal control issues at Saemaeul Geumgo continue, there have also been criticisms regarding the lack of professional personnel at the overseeing authority, the Ministry of the Interior and Safety. Each year, Saemaeul Geumgo faces a constant stream of incidents and accidents, such as the recent improper loan case worth approximately 180 billion KRW, in which involved executives and real estate developers were sent to the prosecution.

Lack of Professional Personnel at the Ministry of the Interior and Safety

According to an analysis by the office of Assemblyman Heo Young of the Democratic Party of Korea on November 17, based on the Ministry of the Interior and Safety's "Status of Financial Supervisory Expertise in the Regional Financial Support Division," as of November this year, only two out of a total of 15 employees-excluding dispatched personnel-had experience related to financial supervision. The Regional Financial Support Division is the department responsible for Saemaeul Geumgo.

Excluding two employees dispatched from the Financial Supervisory Service and the Korea Deposit Insurance Corporation, only two individuals, identified as Grade 5 employees A and B, had experience that could be considered relevant to financial supervision. Employee A worked at the Financial Services Commission for 15 years, while employee B worked in the financial sector for 20 years.

Aside from employees A and B, five other civil servants listed experience with the "Saemaeul Geumgo Innovation Support Task Force" as their expertise in financial supervision. The Saemaeul Geumgo Innovation Support Task Force was established within the Ministry of the Interior and Safety in 2023 to strengthen management and supervision during the bank run crisis faced by Saemaeul Geumgo. It operated for about one year, from November 2023 to November of last year.

Although the Saemaeul Geumgo Innovation Support Task Force signed a memorandum of understanding (MOU) with the financial authorities, there are criticisms that working for one year in an internally established organization does not constitute sufficient expertise in financial supervision. Additionally, the ministry's submission of employees with academic backgrounds in finance, business administration, or economics has also been evaluated as lacking direct relevance to the practical work of financial supervision.

Even during the bank run crisis in 2023, only one employee out of the 13 in the Regional Financial Support Division-excluding the three dispatched from the Financial Services Commission, Financial Supervisory Service, and Korea Deposit Insurance Corporation-could be classified as a professional staff member.

There have also been criticisms that employees dispatched from the Financial Supervisory Service return to their original posts within one to two years, making it difficult for them to fully grasp their work. Of the six employees dispatched between 2020 and this year, except for one who served for two years starting in 2019, all others returned within one year to one year and six months.

The number of employees in the Regional Financial Support Division has increased from 13 in 2020 to 15 at present, but they are still responsible for overseeing and supervising 1,276 Saemaeul Geumgo branches and the Saemaeul Geumgo Central Association nationwide.

Lee Chanjin, Governor of the Financial Supervisory Service, appeared at the National Assembly audit on the 27th of last month and said, "The supervisory authority of mutual finance is limited to credit businesses, but if we consider issues related to moral hazard of central associations, I am fully in favor of unifying the supervisory authority." Yonhap News

Renewed Debate over Transfer of Saemaeul Geumgo Supervision

Due to the Ministry of the Interior and Safety's lack of expertise in the financial sector, there have been ongoing calls to transfer supervisory authority to the financial authorities. The issue of transferring supervision over Saemaeul Geumgo was reignited during the National Assembly audit held last month.

Lee Chanjin, Governor of the Financial Supervisory Service, drew attention by emphasizing the need to strengthen supervision over Saemaeul Geumgo. At the comprehensive audit of the National Policy Committee on the 27th of last month, Governor Lee stated that he "actively supports" unifying Saemaeul Geumgo's supervisory authority under the Financial Supervisory Service.

The issue of transferring supervisory authority over Saemaeul Geumgo has been consistently raised, especially within political circles. Calls for such a transfer have grown stronger since the bank run crisis in 2023. In response, the Ministry of the Interior and Safety and the Financial Services Commission signed an MOU early last year, agreeing to jointly supervise Saemaeul Geumgo's credit business through mutual consultation. However, in reality, it remains difficult for the Financial Supervisory Service to independently conduct inspections as it does with other financial institutions.

The Ministry of the Interior and Safety still appears determined to retain its supervisory authority. Governor Lee pointed out, "It seems that the Ministry of the Interior and Safety has recently changed its stance and now holds a different view regarding unifying the supervisory system." In fact, discussions remain at a standstill. According to a written response submitted to Assemblyman Heo by the Office for Government Policy Coordination, "We understand that the Ministry of the Interior and Safety and the Financial Services Commission are currently reviewing the transfer of supervisory authority over Saemaeul Geumgo," but the reply remained noncommittal.

Regarding this, Assemblyman Heo stated, "Despite the efforts of the Ministry of the Interior and Safety, it has become clear that there are fundamental limitations to the current system," and emphasized, "The supervisory system for Saemaeul Geumgo should be restructured around the financial authorities to establish a continuous supervisory framework that the public can trust."