The Financial Supervisory Service checks real estate and construction loans for each mutual finance organization quarterly. This is due to the deterioration of stability in the mutual finance sector caused by bad loans related to these sectors, prompting increased monitoring. The mutual finance sector must keep real estate and construction loans at or below 30% of total loans, but there are many places that do not comply.
According to the financial sector on the 18th, the FSS will revise the mutual finance sector work report with this content.
Specifically, mutual finance organizations will now be required to report the total amount of loans in the construction and real estate sectors to the FSS, divided into individual businesses and corporations. The proportion of construction and real estate loans in the overall loans will also be subject to reporting. The reporting items also included loans related to policy funding in the construction and real estate sectors.
Mutual finance organizations must handle loans related to real estate and construction at 30% or less of total loans for individual businesses and corporations, and the total amount must be limited to 50% or less of total loans. However, there are many organizations that do not comply with this rule. According to materials submitted by the FSS to the office of Oh Gi-hyung, a member of the Democratic Party of Korea, 122 out of 2,208 organizations, including credit cooperatives, agricultural cooperatives, fishery cooperatives, and forestry cooperatives, did not comply with the lending limit regulations for real estate and construction as of the end of December last year.
The mutual finance sector is experiencing a deterioration in stability due to bad loans related to construction and real estate. According to the FSS and the Bank of Korea, the ratio of bad loans (substandard loans) that are more than three months overdue reached 7.2% in the first quarter. This is the highest quarterly figure since statistics began being compiled in 2011. As of the end of March this year, it is estimated that about 1,000 mutual finance organizations nationwide recorded losses.
The financial authorities plan to strengthen management of key indicators related to the stability of the mutual finance sector, such as the loan-to-deposit ratio and the arrears rate.