The government has decided to delegate authority to the president of the Korea Federation of Saemaul Geumgo to recommend or demand timely corrective measures for poorly performing Saemaul Geumgos through amendments to the enforcement decree. This grants authority to designate failing geumgos and issue management improvement orders to the central president, which contradicts the intention of reducing the central president's powers as stipulated in the legal amendment.
The target for mandatory appointment of full-time auditors, introduced to establish a permanent monitoring system, has been set at around 3% of all geumgos. Criticism is unavoidable as the Saemaul Geumgo Management Innovation Act (revised Saemaul Geumgo Act, hereafter referred to as the Innovation Act) has become a patchwork through enforcement decrees.
The government explained that since mutual financing sectors such as NongHyup are also operating similar systems, the principle of "same industry, same regulation" has been applied.
According to related departments on the 14th, the Ministry of the Interior and Safety recently announced an advance notice for partial amendments to the enforcement decree of the Saemaul Geumgo Act. This is a follow-up measure to establish legal grounds ahead of the implementation of the Innovation Act in July.
The amendment to the enforcement decree includes provisions stating that authority is delegated to the central president to designate geumgos at risk of failing and to recommend or demand timely corrective measures for them. The Innovation Act granted the Minister of the Interior and Safety the authority to designate failing geumgos and issue orders for corrective measures. Among these, the authority to recommend or demand timely corrective measures for geumgos at risk has been delegated to the central president. The main goal of the Saemaul Geumgo Management Innovation Act was to disperse and reduce the excessive powers of the central president.
The Ministry of the Interior and Safety explained that the power to recommend or demand timely corrective measures also exists for the central president in mutual financial sectors such as NongHyup, stating that the enforcement decree was amended based on this model. Previously, the central president had the authority to issue management improvement measures for poorly performing geumgos, and the law amendment has restructured this into timely corrective measures, asserting that this is unrelated to strengthening the central president's power.
The mandatory appointment of full-time auditors and compulsory external audits, which were at the core of the Innovation Act, have also been significantly reduced in the target geumgos. The amendment to the enforcement decree sets the threshold for mandatory appointment of full-time auditors at a total asset of 800 billion won or more. Earlier, the revised Saemaul Geumgo Act stipulated that large Saemaul Geumgos designated by presidential decree must appoint full-time auditors, with the threshold determined through the enforcement decree. According to the Korea Federation of Saemaul Geumgo, as of the end of June last year, among 1,284 geumgos nationwide, only 42 (3.3%) had total assets exceeding 800 billion won. Effectively, most geumgos have been excluded from the obligation to appoint full-time auditors. The threshold of 800 billion won was also applied in the same manner as that for NongHyup.
The criteria for mandatory external audits for geumgos is set at total assets of 300 billion won each year. It is estimated that geumgos with total assets of 300 billion won or more represent about 19% (approximately 250) of all geumgos.
The Innovation Act was developed in response to the need for significant reforms following the July 2023 "bank run" incident. However, from the stage of legal amendment, many key details related to governance reform, which were highlighted as crucial in the innovation proposal, were largely omitted from the bill, leading to criticism that it is a "half-hearted reform proposal." Earlier, the Ministry of the Interior and Safety announced that the number of regional directors (unit geumgo chairpersons) would be reduced from 13 to 8; however, this detail was omitted from the final amendment.
The 'reappointment of chairpersons' was also considered, but it was excluded from the final bill. The reappointment system was aimed at preventing cases where geumgo chairpersons exercised 'lifetime power' through loopholes. There have been numerous instances where chairpersons exploit the absence of reappointment rules by resigning before their term ends and running for re-election, leading to long-term tenure. This amendment to the enforcement decree has caused significant regression to the innovations that were at least included in the amendment.
A financial sector official noted, "It seems that the National Assembly and the Ministry of the Interior and Safety are passive about diminishing the authority of the central president or chairperson of Saemaul Geumgos, which have strong regional influences."