Government to Operate Special Management Period for Korean Federation of Community Credit Cooperatives, Sets Targets to Improve Soundness

[Financial News]
The Ministry of the Interior and Safety (MOIS), the Financial Services Commission (FSC), the Financial Supervisory Service (FSS), the Korea Deposit Insurance Corporation (KDIC) and other related institutions announced on the 18th that they will dramatically improve the soundness of the Korean Federation of Community Credit Cooperatives so that it does not become a destabilizing factor in the financial market, by operating a special management period and strengthening their cooperation framework.
The relevant institutions are operating a special soundness management period through June this year to improve the management performance of the Korean Federation of Community Credit Cooperatives and enhance its external credibility.
During this period, they are continuously checking the status of key indicators such as delinquency rates, deposits and liquidity, losses, and restructuring of insolvent cooperatives, while assigning soundness improvement targets by region and by cooperative. For underperforming entities, they are providing intensive guidance so that management targets can be achieved through on-site inspections, meetings with management, and obtaining written commitments.
In addition, a Joint Special Management Task Force (TF) has been launched so that the cooperative soundness management and supervisory cooperation system between MOIS and the financial authorities can function in an even more closely coordinated manner.
The special management TF is composed of key personnel from the supervisory departments of the four institutions. Based on information compiled on a daily, weekly, monthly (quarterly), and semiannual basis, it conducts conference calls to continuously monitor management indicators, share information, carry out joint inspections, and discuss overall issues related to soundness management and supervision, including institutional improvements.
The conference call system, which previously centered on MOIS and the federation’s central headquarters, has been expanded and reorganized into a framework led by MOIS and the financial authorities, with video conferences held every week. In addition, regular meetings at the first vice-ministerial level (between the Director General for Local Finance and Economy at MOIS and the Secretary General of the FSC) are used to review the situation.
Meanwhile, from the withdrawal incident at the Korean Federation of Community Credit Cooperatives in July 2023 through the end of last year, a total of 42 cooperatives were merged. Going forward, MOIS plans to make more active use of its prompt corrective action and other supervisory powers to restructure insolvent cooperatives more swiftly.
Furthermore, MOIS and the financial authorities have decided to significantly expand joint inspections in 2026 in order to strengthen soundness management and supervision.
Based on increased staffing at the Financial Supervisory Service and the Korea Deposit Insurance Corporation, the number of cooperatives to be inspected this year will be greatly expanded from 32 last year to 57 this year, and during the first half of the year, which is designated as the special management period, joint inspections will be conducted on more than twice as many cooperatives as before.
The relevant institutions also agreed to actively cooperate in promoting necessary institutional reforms so that the Korean Federation of Community Credit Cooperatives can restore its identity as a local and community-based financial institution serving ordinary citizens.
MOIS and the Korean Federation of Community Credit Cooperatives will faithfully implement follow-up measures to the institutional improvement plan for the mutual finance sector that was drawn up by the Mutual Finance Policy Council.
The financial authorities will also actively provide institutional support where needed by listening carefully to on-site opinions from cooperatives that arise in the course of managing delinquency rates and carrying out restructuring.

ktitk@fnnews.com Kim Tae-kyung Reporter