Credit Unions’ Loans Exceeding Lending Limits Hit 5.7 Trillion Won ... Delinquencies Rise as Reserves Barely Scrape By

[Financial News] Credit unions nationwide have violated regulations by lending more than the permitted limit to certain borrowers, with the loans totaling 5.7 trillion won, according to newly released figures. Although the delinquency rate on corporate loans has exceeded 10%, provisions set aside against potential losses are only slightly above the statutory minimum, prompting calls for stronger soundness management.
According to data submitted by five mutual finance institutions to Rep. Song Ok-joo of the Democratic Party of Korea, a member of the National Assembly’s Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, as of the end of June this year, loans exceeding the single-borrower lending limit at 859 credit unions nationwide totaled 3,998 cases worth 5.671 trillion won. This amounted to 5.2% of credit unions’ total loans, which stood at 109.9978 trillion won as of June this year.
Compared with 746 cases worth 1.5522 trillion won at the end of 2023, the number of cases rose 5.4-fold and the amount 3.7-fold. The amount was also substantial compared with those at other mutual finance institutions: 476.3 billion won at Suhyup and 101.7 billion won at Nonghyup.
Indicators of loan quality also deteriorated. The delinquency rate on credit union corporate loans rose 4.78 percentage points, from 5.46% at the end of 2023 to 10.24% this June. Nonperforming loans for which repayment of principal and interest is uncertain also reached 7.1 trillion won.
By contrast, the loan-loss reserve ratio was 100.5%, the lowest among the five mutual finance institutions. It was only just above the statutory minimum of 100%.
The number of credit unions placed under prompt corrective action due to deteriorating management also increased, from 36 in 2023 to 128 in June this year.
Rep. Song urged, “More than 5.6 trillion won in loans exceeding the lending limit have been left unaddressed, the corporate loan delinquency rate has exceeded 10%, and the capacity to set aside reserves is also exhausted,” adding, “Financial authorities and Credit Union Central should immediately conduct a comprehensive inspection and draw up strong restructuring measures for distressed credit unions.”

[email protected] Lee Hyun-jung Reporter