Mutual Finance Blocked by Regulations

Mutual financial institutions are expected to play the role of financial institutions for ordinary citizens, but in reality, their performance in handling financial products for low-income and policy-based customers lags behind that of banks. There are also many cases where they face discrimination in various lending regulations simply because they are mutual financial institutions. According to the financial sector on September 12, the amount of new policy fund loans handled by Saemaul Geumgo in the first half of this year was 20.03 billion won. Specifically, 4.53 billion won was for Sunshine Loans, 13.22 billion won was for loans under agreements with local governments, and 2.28 billion won was for policy fund loans for small business owners. The average annual amount from 2019 to last year was 29.74 billion won. By category, the average for Sunshine Loans was 16.45 billion won, local government agreement loans 11.12 billion won, and small business owners 2.17 billion won. For credi

Mutual financial institutions perform the same roles in providing community-based and inclusive financial services, but their supervisory frameworks are mixed, resulting in inconsistent application of regulations. For example, the Financial Consumer Protection Act, which is designed to protect financial consumers, applies only to credit unions. If the principle of "same function, same regulation" is not observed, regulatory arbitrage can occur, and as a result, certain assets may flow disproportionately into mutual financial institutions with looser regulations due to the so-called balloon effect. Different Prudential Regulations and Supervisory Systems... Financial Consumer Protection Act Applies Only to Credit UnionsAccording to the financial sector on September 12, prudential regulation systems and supervisory frameworks applied to mutual financial institutions vary by institution. First, the mandatory reserve ratio for redemption reserves?funds set aside at the central association

Editor's NoteWhat exactly are mutual finance institutions? Are they simply cooperatives designed to benefit their members? By examining Article 1 of the laws governing each mutual finance institution, we can understand their true identity. Mutual finance institutions aim to contribute to the development of local communities and the national economy, based on the spirit of mutual aid and solidarity. This means they bear even greater social responsibility than banks, which prioritize financial market stability and national economic growth above all else. However, over the past decade, mutual finance institutions have faced criticism for focusing on profitability rather than fulfilling their duty to support local communities and ordinary citizens. Behind this, however, were not only market conditions but also poorly designed government regulations. Since 2015, stricter household lending regulations have encouraged a shift toward corporate lending, which in turn led to defaults in real est

Editor's NoteWhat are mutual finance institutions? Are they simply cooperatives that exist to benefit their members? Article 1 of the laws governing each mutual finance institution reveals their true identity. Mutual finance institutions aim to contribute to the development of local communities and the national economy, guided by the spirit of mutual aid and solidarity. This means they bear greater social responsibility than banks, whose top priorities are financial market stability and the development of the national economy. However, over the past decade, mutual finance institutions have faced criticism for prioritizing profitability over their obligations to serve ordinary citizens and local communities. The underlying causes include not only market conditions but also poorly designed government regulations. Since 2015, stricter household loan regulations have driven a surge in corporate lending, which in turn has led to real estate project financing (PF) insolvencies and deteriorat