The government decided to strengthen joint oversight by related agencies and to establish an internal control committee within the Korean Federation of Community Credit Cooperatives (KFCC), instead of a transfer of oversight authority over the KFCC. President Lee Jae-myung noted in September that "the KFCC is in a supervisory blind spot," prompting expectations that oversight authority would be transferred to the financial authorities.
According to the financial sector on the 26th, the KFCC recently reported plans to strengthen oversight of the KFCC to the National Assembly's Public Administration and Security Committee. The report included a plan to establish an internal control committee within the KFCC and to enhance the independence of the audit body, the Vault Supervision Committee.
The Ministry of the Interior and Safety (MOIS) decided to build a supervisory framework for individual vaults in cooperation with the Financial Supervisory Service and the federation. The plan is to expand information sharing with the Financial Supervisory Service (FSS) and strengthen real-time monitoring to detect signs of insolvency early. They also decided to conduct regular joint audits and put in place a system to respond immediately to risk factors.
The federation will strengthen the "prompt corrective action" system for insolvent vaults to step up restructuring. The federation presented a goal of turning all vaults to profit by 2028 by issuing prompt corrective actions to vaults whose capital is impaired and carrying out restructuring such as mergers and closures.
Unlike other mutual finance institutions, the KFCC is uniquely overseen and supervised by its competent ministry, the MOIS. In the cases of NongHyup, the National Federation of Fisheries Cooperatives, the National Forestry Cooperatives Federation, and credit unions, the credit business that falls under finance is overseen by the financial authorities. As a result, there have been steady criticisms that the KFCC is in an oversight blind spot.
President Lee Jae-myung noted in September that "the KFCC is in a blind spot of oversight," and Financial Supervisory Service (FSS) Governor Lee Chan-jin also said, "We actively agree to unify the supervisory framework (for mutual finance institutions) under the principle of same function, same regulation." Afterward, a plan to transfer the KFCC's supervisory authority to the financial authorities was discussed but was scrapped again.
A Ministry of the Interior and Safety (MOIS) official said, "We decided to revisit the plan to transfer oversight after conducting a joint prudential review with the FSS in the first half of next year and reviewing the results," adding, "We also coordinated this with the presidential office."
In the financial sector, some say the influence of the KFCC chair, who leads a federation with 4.3 million members, could not be ignored ahead of next year's election. In political circles, given the KFCC's nature as a community-based financial institution, vault chairs are seen as influencing local public opinion in various elections.
An official at a mutual finance institution said, "Ahead of local elections, where grassroots public sentiment is crucial, it would have been difficult to ignore the influence of vault chairs."