Amendment to Credit Union Act enforcement decree open for public comment through July 15
South Korea's National Credit Union Federation has established operational guidelines for its planned non-performing loan (NPL) subsidiary, the Credit Union Asset Management Company. The move is expected to strengthen the credit union sector's ability to resolve bad loans and manage financial soundness by building a comprehensive NPL management system comparable to those of other mutual finance institutions such as NongHyup and the National Mutual Credit Federation.
The Financial Services Commission announced Friday that it would open a public comment period through July 15 on a proposed amendment to the enforcement decree of the Credit Union Act. The amendment sets out detailed rules for operating the Credit Union Asset Management Company, as well as criteria for appointing standing auditors. It defines the scope of non-business assets the company may acquire as: assets obtained by credit union branches, the central federation, or federation-invested companies as a result of NPLs; fixed assets that must be disposed of under management improvement or financial rehabilitation measures; and fixed assets no longer used for business purposes following mergers, business transfers, or contract assignments. The acquisition price for distressed assets must be based on objective valuations — such as appraisals by licensed appraisal firms — while also accounting for senior bonds, real rights and lease rights. When a price cannot be fixed in advance, the difference between the acquisition price and the disposal price may be settled after the fact.
The amendment also establishes a legal basis allowing the asset management company to process unique identification information, including resident registration numbers, when unavoidable in carrying out duties such as purchasing, selling or collecting on distressed assets.
The National Credit Union Federation is preparing to launch the asset management company with a target opening date of October. With the regulatory framework now in place following the decree amendment, the federation is expected to accelerate the remaining preparatory work.
The amendment also specifies criteria for appointing standing auditors at credit unions. Credit unions required to appoint a standing auditor are defined, in line with existing practice, as regional or group credit unions with total assets of 300 billion won (about $196 million) or more. However, unions affiliated with religious organizations, incorporated associations or occupational groups that meet certain conditions may be exempt from the requirement. Under the revised Credit Union Act, credit unions that may voluntarily appoint a standing auditor are defined as those with total assets of 200 billion won or more but less than 300 billion won — covering regional and group credit unions, as well as unions whose boards determine that a standing auditor is necessary for soundness management, internal controls or financial accident prevention.
ehkim@heraldcorp.com
