{"id":2207851,"date":"2025-01-07T08:00:34","date_gmt":"2025-01-06T23:00:34","guid":{"rendered":"https:\/\/koreapro.org\/?p=2207851"},"modified":"2025-01-06T16:46:54","modified_gmt":"2025-01-06T07:46:54","slug":"stronger-oversight-aims-to-fix-flaws-in-south-koreas-mutual-credit-institutions","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2025\/01\/stronger-oversight-aims-to-fix-flaws-in-south-koreas-mutual-credit-institutions\/","title":{"rendered":"Stronger oversight aims to fix flaws in South Korea\u2019s mutual credit institutions"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">South Korea\u2019s interior ministry <\/span><a href=\"https:\/\/www.mois.go.kr\/frt\/bbs\/type010\/commonSelectBoardArticle.do?bbsId=BBSMSTR_000000000008&amp;nttId=114872\"><span style=\"font-weight: 400;\">announced<\/span><\/a><span style=\"font-weight: 400;\"> on Monday that amendments to the Saemaul Credit Cooperatives Act (Saemaul Geumgo) will be promulgated on Tuesday. The move marks a major step in addressing governance flaws and financial vulnerabilities exposed by the mutual credit cooperative\u2019s <\/span><a href=\"https:\/\/koreapro.org\/2023\/08\/how-a-south-korean-creditors-troubles-put-rok-financial-stability-at-risk\/\"><span style=\"font-weight: 400;\">July 2023 bank run<\/span><\/a><span style=\"font-weight: 400;\">. Key revisions include limiting the central chairman\u2019s authority to external representation and board leadership, introducing a single four-year term and expanding cooperatives\u2019 access to liquidity from the Bank of Korea and other financial institutions. Reserve deposit ratios for cooperatives will also rise from 50% to 80% to enhance financial stability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The reforms further require large cooperatives to appoint full-time auditors and codify \u201ctimely corrective actions\u201d for struggling branches. New provisions empower members with litigation rights and the ability to dismiss executives, aligning with broader efforts to improve oversight, transparency and depositor protection within South Korea\u2019s mutual credit institutions.<\/span><\/p>\n<p><b>WHY IT MATTERS<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The reforms aim to prevent liquidity crises like the 2023 bank run, which revealed systemic weaknesses within Saemaul Geumgo\u2019s decentralized structure. The bank run exposed a dual problem: excessive centralized authority at the headquarters, combined with insufficient oversight of branch-level operations. By decentralizing authority at the headquarters level \u2014 shifting responsibilities to professional managers \u2014 and imposing stricter oversight on independent branches through mandatory full-time auditors and timely corrective actions, the government aims to balance governance and operational independence while ensuring accountability throughout the system.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Public trust in Saemaul Geumgo, which manages over $190 billion (<\/span><a href=\"https:\/\/www.chosun.com\/opinion\/editorial\/2023\/07\/07\/U64SLT727ZAAROR2W6MH2HO6OI\/?utm_source=naver&amp;utm_medium=referral&amp;utm_campaign=naver-news\"><span style=\"font-weight: 400;\">280 trillion won<\/span><\/a><span style=\"font-weight: 400;\">) in assets, is critical for South Korea\u2019s financial stability. Expanded liquidity measures and higher reserve requirements may reassure depositors and prevent future runs. However, questions remain about whether the interior ministry \u2014 with limited financial regulatory expertise compared to other agencies such as the Financial Services Commission \u2014 has the capacity to oversee Saemaul Geumgo\u2019s <\/span><a href=\"https:\/\/www.businesspost.co.kr\/BP?command=article_view&amp;num=314377\"><span style=\"font-weight: 400;\">3,260 regional offices nationwide<\/span><\/a><span style=\"font-weight: 400;\">. The July 2023 bank run was largely driven by Saemaul Geumgo\u2019s <\/span><a href=\"https:\/\/biz.sbs.co.kr\/article\/20000124619?division=NAVER\"><span style=\"font-weight: 400;\">overexposure to the real estate market<\/span><\/a><span style=\"font-weight: 400;\">, where declining property values and rising interest rates strained its finances.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>South Korea\u2019s interior ministry announced on Monday that amendments to the Saemaul Credit Cooperatives Act (Saemaul Geumgo) will be promulgated on Tuesday. The move marks a major step in addressing governance flaws and financial vulnerabilities exposed by the mutual credit cooperative\u2019s July 2023 bank run. Key revisions include limiting the central chairman\u2019s authority to external [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2207852,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24],"class_list":["post-2207851","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Stronger oversight aims to fix flaws in South Korea\u2019s mutual credit institutions - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2025\/01\/stronger-oversight-aims-to-fix-flaws-in-south-koreas-mutual-credit-institutions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Stronger oversight aims to fix flaws in South Korea\u2019s mutual credit institutions - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"South Korea\u2019s interior ministry announced on Monday that amendments to the Saemaul Credit Cooperatives Act (Saemaul Geumgo) will be promulgated on Tuesday. 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