finance
Entered 2024.04.03 18:23 Modified 2024.04.03 21:24 Paper A3
Hankyung, completed a survey of 1,288 locations
Because of excessive lending without standards
‘Complete poor management’ including lax management
Efforts to improve the strength of the government are meaninglessThe average delinquency rate increased to 7% in March
“We need management and supervision that focuses on the financial authority.”
It was revealed that one in three Saemaul Geumgo had a net loss last year. It was calculated that the number of safe deposit boxes in deficit was 431, an increase of 10 times more than a year ago. On the 3rd, a customer enters the Saemaeul Geumgo branch in Jung-gu, Seoul. Reporter Choi Hyuk Saemaeul Geumgo, with total assets of 287 trillion won, is in trouble. It was revealed that, among the 1,288 Saemaul Geumgos throughout the country, the number of those in deficit has increased tenfold in just one year. Under the leadership of the Saemaul Geumgo Federation, more than 2 trillion won in non-performing loans were cleared at the end of last year, but there were 80 coffers with delinquency rates exceeding 10%.
On the 3rd, the Korea Economic Daily conducted a thorough investigation of last year’s management disclosures by 1,288 local Saemaeul Geumgoes, and found that 431 of them had an annual net loss. This means that one in three safes are faulty. The number of deficit coffers increased almost tenfold in just one year from 45 in 2022. The number of coffers whose soundness has worsened due to failure to receive the money borrowed immediately has also increased significantly. The number of safe deposit boxes with a non-performing loan (NPL) ratio of 8% or higher, which is recommended by financial authorities, has almost quadrupled from 53 in 2022 to 212 last year. The situation has worsened this year. It is reported that Saemaul Geumgo’s overall delinquency rate has risen from 5.07% at the end of last year to 7% at the end of last month.
Each branch of Saemaul Geumgo is effectively an independent corporation, so even if insolvency occurs in a particular vault, it will not be transferred to another branch. However, with dozens of coffers simultaneously full of insolvency, there is a growing sense of crisis that ‘tin coffers’ may be spilling out.
There are also signs that large-scale restructuring is needed. An official from the financial sector pointed out, “Saemaul Geumgo’s biggest problem is the ‘blind’ lending that comes from its chairman-centred governance structure,” and added, “Even when insolvency occurs, there are many cases where it is prevented by extension. the maturity of the loan or write off the interest.” Starting on the 8th, the Financial Supervisory Service and the Korea Deposit Insurance Corporation will begin their first on-site inspection of four large safes along with the Saemaeul Safe Deposit Center.
The Financial Supervisory Service also began an inspection on this day regarding the suspicion of ‘illegal borrowing’ by Saemaeul Geumgo from Democratic Party candidate Yang Moon-seok.
Is Saemaul Geumgo ‘safe tin’? 44 places with delinquency rates greater than 10% → 80 places
A crisis bell is ringing in Saemaeul Geumgo, which is identified as a trigger for the insolvency of real estate project financing (PF). After experiencing a ‘bank run event (large-scale deposit withdrawal)’ in July last year, the government took steps to improve resilience, but the current status of individual safes identified is appraised as alarming. There are even concerns that some coffers could be reduced to ‘tin scraps’ due to severe insolvency caused by irrational lending without standards, lax management and supervision, poor internal control, and management unprofessionalism.
○ 80 safe deposit boxes with a double digit delinquency rate
On the 3rd, the Korea Economic Daily conducted a thorough survey of last year’s management disclosures of 1,288 local Saemaeul Geumgos across the country, and found that 80 of them had a delinquency rate of more than 10%. There were 44 safe deposit boxes with a delinquency rate of over 10% in 2022. It has almost doubled in just one year.
Last year, Saemaul Geumgo’s overall average delinquency rate was 5.07%. It rose by 1.48 percentage points compared to the previous year. Compared to savings banks (6.55%), which increased by 3.14 percentage points during the same period, it appears to be at a good level. However, if you look at the actual condition of individual coffers, the situation is not very good. There were 13 safes with a delinquency rate of over 15% and three safes with a delinquency rate of over 20%. Most coffers with high delinquent rates had a large proportion of corporate loans. Many of these were identified as real estate related loans. At A Safehouse Seoul, which had a delinquency rate of 22.27%, corporate loans accounted for 87.56% of all loans. The ratio of non-performing loans (below default) from this safe was 24.37%, which was more than three times the level recommended by the financial authorities (8% or less). In Incheon’s B Safe, which had a delinquency rate of 20.15%, the proportion of corporate loans was 65.53%. The non-performing loan ratio (16.98%) was also high. This means that as the real estate recession continues, the number of non-performing loans that are difficult to repay is increasing.
There were 23 coffers whose net capital ratio, an indicator related to loss absorption capacity, was below the regulatory level (less than 4%).
It is said that Saemaul Geumgo’s delinquency rate has risen rapidly this year. According to the financial industry, the financial authorities tentatively calculated the delinquency rate of Saemaul Geumgo at the end of March this year and found that it was above the 7% level. It has increased by almost 3 percentage points in just three months compared to the end of last year (5.07%).
An official from the financial authorities said, “Korea Asset Management Corporation (CAMCO) bought 1 trillion worth of non-performing loans from Saemaeul Geumgo late last year, which has lowered the delinquency rate.” He added, “The delinquency rate for corporate loans is rising rapidly, so the overall delinquency rate may soon exceed 10%.” And look forward.
○ “Do you have the ability to prepare for risks?”
The government is making every effort to prevent the financial impact of Saemaeul Geumgo’s report in all areas. In addition to KAMCO, we encourage the sale of delinquent bonds through MCI Loans, a subsidiary of Saemaeul Geumgo. We also intend to encourage liquidation of PF businesses through auctions and public auctions. The Bank of Korea also decided to supply liquidity directly to Saemaul Geumgo in times of crisis.
However, some doubt Saemaul Geumgo’s ability to respond to the crisis. It is a longstanding criticism that because Saemaul Geumgo is under the jurisdiction of the Ministry of Public Administration and Security, not the financial authorities, its management and supervision is relatively lax compared to other financial institutions. For example, starting next year, Saemaul Geumgo will be subject to regulations that prohibit it from lending more than 30% of its loans to the same industry. This is a ‘back door regulation’ introduced when real estate PF insolvency became a reality. Savings banks can only lend to businesses with more than 20% of the developer’s equity capital.
There is also criticism that it is difficult to trust the financial expertise and level of internal control of individual coffers. An official from the financial sector said, “Unlike other industries controlled by the financial authorities, there are many concerns that Saemaul Geumgo is hiding insolvency by assessing loan soundness as good.” “It could come as a shock,” he said.
External audit obligations are also noted to be weak compared to other financial mutual companies. In the case of Saemaul Geumgo, who has assets of more than 50 billion won, he only receives payments every two years. Credit unions with assets of 30 billion or more have an external accounting audit every year. Last year, the Saemaul Geumgo Management Innovation Advisory Committee decided to require all vaults worth 300 billion won or more to undergo annual accounting audits, but only 19.4% (251) vaults have strengthened external audits. An official from the Saemaul Geumgo Federation said, “We manage and supervise thoroughly under the guidance of the Ministry of Public Administration and Security,” and added, “We expect the management situation to stabilize this year.”
Reporters Jo Mi-hyeon/Seo Hyeong-kyo/Oh Yu-rim seogyo@hankyung.com
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