Revision to law planned to allow financial authorities to supervise MG Community Credit
A customer enters a branch of MG Community Credit in Namyangju, Gyeonggi Province, Friday. Yonhap
By Lee Yeon-woo
The National Assembly is proceeding with a revision in the law that would permit financial authorities to supervise MG Community Credit Cooperative instead of the Ministry of the Interior and Safety.
This change is deemed necessary due to the cooperative's unusual circumstance of being under the supervision of the interior ministry, which is believed to have contributed to its subpar management.
The move has come amid growing public concerns over the possible bankruptcy of the cooperative as its loan delinquency rate has risen, leading to a spree of customers withdrawing their capital from it.
Since 1973, the interior ministry has held supervisory power over the cooperative, unlike other domestic credit cooperatives, which are typically under the supervision of the financial authorities.
According to sources from National Assembly, some members of the main opposition Democratic Party of Korea (DPK) and the minor opposition Basic Income Party are preparing to propose relevant revisions bills within this week. They are also seeking support from lawmakers of the ruling People Power Party to endorse them.
The main focus of the bills is to authorize the Financial Service Commission (FSC) to supervise the cooperative's credit and mutual-aid businesses, and to issue necessary orders if required.
Under existing regulations, financial authorities lack the power to directly supervise the cooperative unless the interior ministry requests their “cooperation.” This stands in contrast to other domestic credit cooperatives, where the FSC and the Financial Supervisory Service (FSS) hold the authority to supervise their respective operations, regardless of which ministry is in charge of the cooperatives.
“The interior ministry announced its plans to enhance the cooperative's solvency last August, but the delinquency rates have continued to rise. This is clear evidence that the cooperative requires comprehensive reform,” Rep. Yong Hye-in from the Basic Income Party said.
Concerns about inadequate oversight have been raised repeatedly. It is understood that the interior ministry lacks the manpower to thoroughly supervise the cooperative as its primary expertise does not lie in finance. Currently, around 14 officials within the ministry are known to be in charge of the cooperative's affairs.
As of 2022, MG Community Credit's overall assets amounted to 284 trillion won ($217.9 billion).
So far, any attempt to modify the law has consistently been thwarted due to the FSC's cautious stance on receiving this authority, along with a pervasive lack of political interest.
“The first thing to do at this moment is to stabilize the current situation (with customers withdrawing their deposits),” FSC Chairman Kim Joo-hyun said during a press conference on Friday, marking his first anniversary in office.
Leaders of financial industry announce the results of their meeting on MG Community Credit Cooperative in downtown Seoul, Sunday. They are, from left, senior presidential secretary for economic affairs Choi Sang-mok, Bank of Korea Governor Rhee Chang-yong, Finance Minister Choo Kyung-ho, Vice Interior Minister Han Chang-sub, Financial Service Commission (FSC) Chairman Kim Joo-hyun and Financial Supervisory Service Governor Lee Bok-hyun. Courtesy of FSC
As the cooperative faces a soaring default rate of 6.4 percent, the government is rolling out emergency measures to safeguard its solvency. On Sunday, Finance Minister Choo Kyung-ho convened a meeting with leaders of the financial industry, pledging to maintain the cooperative's solvency and liquidity. He also announced the launch of a pan-government support group for the cooperative, which is set to kick off on Monday, with the aim of establishing a responsive system.