It was revealed that the Saemaul Geumgo Federation (hereinafter referred to as the Federation of Korea Federation of Korea Federation of Korea Federation of Korea) had been neglecting the introduction of a system to review the risks of real estate PF (project financing) loans for over two years despite warnings from financial authorities . It is pointed out that the central council’s poor management and supervision contributed to Saemaul Geumgo’s insolvency.
According to Money Today’s coverage on the 7th, the central association introduced the ‘joint loan advance review system’ in March 2021. It has been two years since individual Saemaul Geumgo began expanding managed land trust loans, a type of real estate PF .
The joint loan review system is a system that requires individual safe deposit boxes to first undergo a review by the Central Committee if they make a joint loan of 10 billion won or more. The maximum amount that an individual safe can invest in a single loan is only 5 billion won, so when there is a large-scale loan such as real estate PF , individual safes gather together to issue a joint loan.
The introduction of the central meeting system was somewhat late. Previously, since 2019, the Financial Services Commission has discussed strengthening regulations and requested a cautious approach as real estate PF balances have rapidly increased , especially in the second-tier financial sector . Accordingly, in March 2020, the Credit Union, a mutual financial association similar to Saemaul Geumgo, established a system that requires joint loans of more than 10 billion won to be evaluated by the central meeting. However, the central association created the system in 2021 the following year by revising the credit business method.
Due to the delay in introducing the system, it is estimated that high-risk loans will have increased over a period of about a year from the end of 2019 to early 2021. Saemaeul Geumgo’s total real estate PF balance , which was 169.4 billion won at the end of 2019, increased to 2.8795 trillion won at the end of 2020. In all cases, individual treasuries independently evaluated business feasibility and provided loans without prior review by the Central Committee. In particular, it is known that safe deposit funds, which have relatively limited review capacity due to their small asset size, have followed the lead of large safe deposit boxes and implemented real estate PF .
It is unclear whether the Central Committee has thoroughly reviewed the system after its introduction. Even in 2021, when the joint loan review system was established, Saemaul Geumgo’s real estate PF balance recorded 9.0992 trillion won, more than tripling in one year. Since then, the increase has continued, and by the end of 2022, the real estate PF balance has soared to 15.5079 trillion won. After establishing a new system, the central association created a credit support department to be in charge of the relevant work, but the number of people in the organization is only six, including the department head. Six people were in charge of reviewing real estate PF conducted by 1,291 safe deposit boxes . The credit union has five employees who review joint loans from 873 unions.
The central association decided to strengthen joint loan screening after the bank run crisis occurred. It is expected that a linked loan system will be adopted that will allow joint loans of more than 20 billion won only when the central association’s capital is also invested. Once the linked loan system is introduced, the central association is expected to become the control tower for loan review. The Federation announced, “In order to promote linked loans, we will reorganize the organization and expand professional manpower to strengthen the credit review and supervision functions within the Federation.”
Corporate loans ‘rise’ 6 times… Saemaul Geumgo, which created a crisis while trying to build up its body
The crisis at Saemaul Geumgo grew as corporate loans, especially those in construction and real estate, increased significantly. Saemaul Geumgo’s strategy of increasing corporate loans, which was centered on household loans, became more concrete with the appearance of Park Cha-hoon, Chairman of Saemaeul Geumgo Central. It is pointed out that attempts to increase volume returned as a boomerang.
According to the Bank of Korea on the 7th, Saemaul Geumgo’s corporate loans as of the end of June amounted to KRW 112.102 trillion, a six-fold increase compared to KRW 19.846 trillion at the beginning of 2019.
The proportion of corporate loans in total loans also increased by nearly 60%. Until three years ago, it was around 30%. Going back five years, it was only 11%. At that time, household loans accounted for 70%.
In particular, the increase in corporate loans from Saemaul Geumgo was notable in the construction and real estate sectors. As of the end of January, Saemaul Geumgo’s construction and real estate-related loans amounted to 56 trillion won, equivalent to half of the 111 trillion won in corporate loans at the time.
The risk increased as Saemaeul Geumgo, which started out as a cooperative for local residents or commercial districts, suddenly increased corporate loans. It is inevitable that the credit business responds sensitively to economic changes, but the risk burden for corporate loans is inevitably greater due to the larger loan size per case compared to household loans. In fact, the delinquency rate for construction and real estate-related loans in January was close to 10%.
An official in the financial industry said, “ PF with Saemaul Geumgo’s participation
He said, “(Project financing) also involves a lot of small-scale construction스포츠토토, such as officetels, multi-family homes, and townhouses, which are relatively high risk,” and added, “Things went awry as we focused on real estate loans with relatively low expertise after seeing the high rate of return.” Saemaul Geumgo said. The change in management strategy to significantly increase corporate loans is in line with the actions of Chairman Park Cha-hoon, who has led the Saemaul Geumgo Federation since 2018. The strategy was evaluated to have worked when the stock and real estate markets were booming. However, due to the recent economic downturn, the strategy was evaluated as effective. There is a contrary evaluation. As real estate PF insolvency emerged, signs of a Saemaul Geumgo bank run (large-scale deposit withdrawal) appeared in July.
Even if insolvency occurred, the problem would not have increased if the internal system had worked properly, but Saemaul Geumgo lacked an internal system. . More than half of the audit committee members in charge of internal control are from within the company, and the Treasury Supervisory Committee, which manages and supervises the entire vault, was found to be significantly short of manpower compared to its quota. The absence of internal self-control or intense discussions has a negative impact on the overall management of Saemaul Geumgo. It seems to have had an impact.
Unable to calm down the signs of a bank run on his own, he received external help. It was only after the Ministry of the Interior and Safety, which was the relevant ministry, as well as the financial authorities, came to the rescue that the signs of a bank run were put to rest.
Another financial industry official said, “The fact that some executives of the Saemaul Geumgo Federation, including Chairman Park, were indicted by the prosecution on charges of receiving bribes may have resulted from a reduction in the internal control function,” adding, “Including the role of the central bank’s control tower, “We need to rebuild its functions and regain its reputation as a representative ‘low-income finance’,” he said.