The net capital ratio, Se-ma-eul Geum-go's capital soundness indicator, is expected to decline starting in 2027. This is because part of the investment paid by Se-ma-eul Geum-go members will not be recognized as net capital in accounting.
According to Se-ma-eul Geum-go on the 15th, starting Jan. 1, 2027, all credit unions nationwide must exclude investments received before Jul. 7, 2016 from net capital. An investment is the money a customer pays when joining Se-ma-eul Geum-go as a cooperative member. This money has been recognized as the capital that serves as Se-ma-eul Geum-go's seed money, but some investments will be excluded from capital. In 2027, it means Se-ma-eul Geum-go's capital will decrease.
Se-ma-eul Geum-go used to withdraw and return the investment on the day of withdrawal if a cooperative member wanted to leave. However, with a partial revision of the Se-ma-eul Geum-go Act, investment refunds were changed to after the settlement of account is finalized for the year of withdrawal. Even if a member withdraws, the investment paid can be received only next year. However, it was decided to apply this only to investments paid after Jul. 7, 2016, when the system was implemented. In the end, investments paid before Jul. 7, 2016 are refunded on the day, and investments paid after that are refunded after the settlement of account is finalized, creating a dual system.
Inside and outside the mutual finance sector, there were pointed out that investments refunded on the day of membership withdrawal cannot be recognized as capital. Capital must play a role in absorbing losses in a crisis. Money that must be withdrawn and returned on the same day whenever a member wishes has no loss-absorbing capacity, so it is closer to a liability, not capital.
As this argument was accepted, Se-ma-eul Geum-go's supervisory standards were changed. Only investments excluding those guaranteed to be refunded upon membership withdrawal regardless of the status of assets and liabilities (investments made before Jul. 7, 2016) are recognized as net capital. These supervisory standards were revised in Nov. 2023, when real estate project financing (PF) distress began in earnest, and it was decided to implement them starting Jan. 1, 2027. For Se-ma-eul Geum-go, whose financial soundness is worsening by the day, it means the worst-case scenario has been avoided.
The net capital ratio, an indicator of financial soundness, is the value obtained by dividing net capital by total assets. If the current situation continues, net capital will decrease and the net capital ratio will inevitably fall. The National Credit Union Federation of Korea (NCUFK) argues that one of the grounds that credit unions are sound is that the net capital ratio is 7.68%, higher than the regulatory ratio, but even this is increasingly likely to become a problem.
Se-ma-eul Geum-go is not disclosing the size of investments made before Jul. 7, 2016. As of the end of 2016, investments at credit unions nationwide amounted to 6.1543 trillion won. In contrast, as of the first half of this year, the figure is 10.1094 trillion won. A significant portion of the investments is estimated to have been paid before 2016. However, because Se-ma-eul Geum-go has encouraged members to convert investments that are refunded on the day into investments that can be received after the settlement of account is finalized, the size of the problematic investments is expected to be smaller than this.
The National Credit Union Federation of Korea (NCUFK) said, "Se-ma-eul Geum-go's management indicators temporarily deteriorated due to expenses incurred in the process of proactive soundness management, such as setting aside provisions for bad debts amid the downturn in the real estate and construction sectors," and added, "There is ample room for improvement as provisions for bad debts are reversed and operating profit increases."