"The Korean Federation of Community Credit Cooperatives (KFCC) central federation is even exercising the power to impose sanctions to dismiss or remove the chair of an independent credit union. Because the central federation handles both inspections and sanctions, credit unions cannot raise their own voices. We must separate the inspection and sanctioning powers and transfer the sanctioning power to individual credit unions. Furthermore, I will establish a sanctions review committee that includes outside members."
Yu Jae-chun, chair of Seoul Livestock Korean Federation of Community Credit Cooperatives (KFCC), who is running in the election for the 20th KFCC central federation chair to be held on the 17th, stated accordingly in an interview with ChosunBiz about the problems of the KFCC and solutions. Yu said reform is needed to disperse the power concentrated in the central federation and respect the autonomy of independent credit unions.
On the 17th, 1,262 credit union chairs nationwide will gather at the MG Human Resources Development Institute in Cheonan, South Chungcheong Province, to elect the next chair. In addition to Chair Yu Jae-chun, candidates include Kim In, KFCC central federation chair, and Jang Jae-gon, chair of Jongno Gwangjang Korean Federation of Community Credit Cooperatives (KFCC).
Yu also proposed ways for the central federation to support individual credit unions. He plans to create a joint fund to cover losses and expenses arising during the disposal of nonperforming loans such as real estate project financing (PF). He also included in his pledges a plan to support credit unions running deficits with statutory reserves that are currently used only for partitioning and dissolution of unions.
To implement his pledges, Yu said he met Jung Chung-rae, leader of the Democratic Party of Korea, National Assembly Vice Speaker Joo Ho-young, and the chairs of the Public Administration and Security Committee and the Climate, Energy, Environment and Labor Committee to request a review of legal amendments. The following is a Q&A with Yu.
—Why did you decide to run?
"After sounding out grassroots sentiment, I thought the KFCC would really struggle unless the central federation changes. Chairs feel there are problems with the central federation's tightening administrative control. The KFCC's unique problem is that both the inspection and sanctioning powers lie with the central federation. The chair did not appoint the credit union chairs. The structure in which an independent chair can be removed just because it is the central federation chair must change."
—What specifically is the tightening administrative control?
"The central federation pressured frontline credit unions to aggressively participate in real estate PF. Many credit unions joined real estate PF at the central federation's request and ran into problems. The central federation should bear at least some responsibility, but it is passing losses on to the credit unions. It is not something to boast about that only the central federation made profits. The central federation is supposed to continuously support struggling credit unions and share losses."
—Are the many pledges to support credit unions aimed at sharing responsibility?
"Eighty percent of credit unions nationwide are suffering due to losses. Statutory reserves should be used to cover credit union losses. That would give frontline credit unions room to pay dividends to members. Competing institutions NongHyup and credit unions amended their laws in 2023 to create such a structure. Only the KFCC has not amended its law. When I visited the National Assembly, I received a positive response that 'you proposed a good plan.'"
—What is the solution for internal controls?
"Because many people work only at one credit union their whole careers, internal controls do not function. Conversely, when an employee from another credit union comes to work, problems are immediately revealed. I will implement a personnel exchange plan through a council where mid-level managers in charge of internal controls discuss matters. If outside employees come and work even for three to six months, illegal or preferential lending cannot occur."
—What are your future revenue sources?
"We will promote a 'wellness town' that combines residences and nursing hospitals. For others it is a business, but for the KFCC it is a concept of service. The share of KFCC members in their 60s and 70s is the highest. Yet they cannot enter because there are no nursing hospitals. We are considering investing by region and by credit union to promote the project and distributing profits according to investment ratios. After receiving management consulting, we found that we can create revenue sources for credit unions through various methods such as launching linked products."