South Korea clears credit union bad-debt manager, operations start November
In short
South Korea's Financial Services Commission said a cabinet meeting on Oct. 6 approved an amendment to the enforcement decree of the Credit Union Act, setting which distressed assets the credit union sector's asset management company may buy and how it prices them. Standing auditor requirements were relaxed for smaller cooperatives. The asset management company is scheduled to begin buying bad debt in November, and Asia Economy reported the decree takes effect on the 22nd.
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South Korea's Financial Services Commission said a cabinet meeting on Oct. 6 approved an amendment to the enforcement decree of the Credit Union Act, setting which assets the credit union sector's asset management company may buy and how it prices distressed assets. The company is scheduled to begin buying bad debt from November, according to Yonhap. [ 1 , 3 , 4 ]
Under the amendment, the company may buy distressed debt acquired by cooperatives and the central federation, fixed assets that must be disposed of under management and financial-improvement measures, and fixed assets no longer used because of mergers, business transfers or contract transfers. Purchase prices are to be set on objective values such as appraisals by appraisal firms, taking senior claims, property rights and leaseholds into account. When setting a price in advance is difficult, the decree allows the difference between the purchase price and the disposal price to be settled later. [ 3 , 4 ]
The amendment also relaxes standing auditor requirements. Appointment is mandatory for regional or group cooperatives with total assets of 300 billion won or more. Cooperatives with assets of 200 billion won or more that are not subject to mandatory appointment may name a standing auditor if the board judges it necessary for soundness, internal control and prevention of financial accidents. Asia Economy added that religious organizations, incorporated associations and occupational groups meeting certain conditions may go without a standing auditor. [ 3 , 4 ]
The Financial Services Commission said it expects the change to ease the management burden on small and mid-sized cooperatives and to encourage voluntary internal-control improvements. Asia Economy reported the revision is intended to build a distressed-debt management system comparable to those of other mutual-finance sectors such as NongHyup. [ 3 , 4 ]
On timing, Asia Economy reported the decree takes effect on the 22nd, and that the company's launch follows the central federation's capital contribution and Financial Services Commission resolution procedures, with bad-debt purchases starting next month. Yonhap said purchases begin after November, while Newsis described a launch within the year. [ 2 , 3 , 4 ]
Why it matters
The decree gives credit unions a dedicated channel to sell bad debt, which the FSC expects to ease the management burden on small and mid-sized cooperatives and encourage voluntary internal-control improvements. Asia Economy reported the change is intended to build a distressed-debt management system comparable to those of other mutual-finance sectors such as NongHyup. The practical effect depends on the company's launch, which documents describe as planned rather than completed.
Key facts
- The Financial Services Commission said the cabinet approved an amendment to the enforcement decree of the Credit Union Act on Oct. 6. [ 4 ]
- The amendment sets the scope of non-business assets the credit union asset management company may buy, including distressed debt acquired by cooperatives and the central federation. [ 1 , 3 , 4 ]
- Purchase prices are to be based on objective values such as appraisals by appraisal firms, taking senior claims, property rights and leaseholds into account. [ 3 , 4 ]
- Standing auditors are mandatory for regional or group cooperatives with total assets of 300 billion won or more, and may be appointed at cooperatives with 200 billion won or more if the board deems it necessary. [ 3 , 4 ]
- Asia Economy reported the amendment takes effect on the 22nd. [ 3 ]
- The asset management company is scheduled to start buying distressed debt in November. [ 1 , 3 , 4 ]
Confirmed by several sources
- The Financial Services Commission prepared an enforcement decree amendment setting which assets the credit union asset management company may buy and the standards for pricing distressed assets. [ 1 , 3 , 4 ]
- The amendment was approved at a cabinet meeting on Oct. 6. [ 4 ]
- Purchasable assets include distressed debt acquired by cooperatives and the central federation, fixed assets that must be disposed of under management and financial-improvement measures, and fixed assets no longer used because of mergers, business transfers or contract transfers. [ 3 , 4 ]
- Standing auditors are mandatory for regional or group cooperatives with total assets of 300 billion won or more. [ 3 , 4 ]
- Cooperatives with assets of 200 billion won or more that are not subject to mandatory appointment may appoint a standing auditor if the board judges it necessary for soundness, internal control and prevention of financial accidents. [ 3 , 4 ]
- The asset management company is scheduled to begin buying distressed debt in November. [ 1 , 3 , 4 ]
Still unclear
- The exact date in November when the asset management company will begin buying distressed debt. The documents say only November or after November, and describe the start as planned, following the central federation's capital contribution and Financial Services Commission resolution procedures.
- The effective date of the enforcement decree, which Asia Economy reported as the 22nd. Only Asia Economy states this date; the other documents do not say when the decree takes effect.
- Newsis' account of the measure. Its article text concerns a Supreme Court chief justice's remarks at a parliamentary audit rather than the credit union measure, so only its headline and feed summary were used; its framing of a launch within the year is less specific than other outlets' November date.
What local media are saying
Timeline, local time
- Chosun Ilbo reports that purchase standards for the credit union asset management company have been drawn up and that it will begin operations in November. [ 1 ]
- Newsis reports the enforcement decree was passed and the distressed-debt manager will launch within the year. [ 2 ]
- Asia Economy reports the amendment's details, including asset scope, pricing standards and auditor rules, and says the decree takes effect on the 22nd. [ 3 ]
- Yonhap reports the cabinet approved the amendment, with bad-debt purchases to begin after November. [ 4 ]