The Korean Federation of Community Credit Cooperatives (KFCC) is making an all-out push to normalize operations, including merging 25 cooperatives whose soundness deteriorated last year. The KFCC plans to raise soundness indicators such as the arrears rate as much as possible this year through additional mergers.
According to a compilation of reporting by ChosunBiz on the 9th, 6 out of 229 cooperatives in the Seoul area last year were merged into other nearby cooperatives. The region with the most mergers was Daegu, with 8. Incheon had 3, Busan and North Gyeongsang had 2 each, and Gwangju-South Jeolla, Ulsan-South Gyeongsang, Gangwon, and North Chungcheong had 1 each. The number of cooperatives nationwide fell from 1,276 at the end of 2024 to 1,251 at the end of last year.
The merged Seoul-area cooperatives were Wonhyo and Hooam-dong in Yongsan District; Oksu in Seongdong District; Sinchon in Seodaemun District; Deungchon-dong in Gangseo District; and Songpa in Songpa District. Deungchon-dong and Oksu were in a state of complete capital erosion, with total capital in the red as of the end of June last year.
Wonhyo, which had maintained its presence since its founding in 1975, was merged into Hyochang. Wonhyo staked everything on improving soundness, including selling the headquarters building and land near Hyochang Park Station on Seoul Subway Line 6, which it had used since 1989, for 9.1 billion won in Dec. 2024. However, as of the end of June last year, its ratio of substandard-and-below loans, a measure of nonperforming asset quality, was 28.86%. Its loss risk–weighted loan ratio, which assigns greater weight the higher the likelihood of default, was 57.45%.
Sinchon, which set up in Sinchon in 1975, was also merged into Dongnipmun in May last year. Sinchon was once considered one of the strong cooperatives benefiting from a prime commercial district. But a real estate investment pursued in 2021 failed, and bad debts began to pile up, leaving it in a state of complete capital erosion as of the end of Dec. 2024, just before the merger.
The Korean Federation of Community Credit Cooperatives (KFCC) is improving soundness by merging cooperatives whose soundness deteriorated after real estate project financing (PF) defaults with other strong nearby cooperatives. When two cooperatives merge, assets and liabilities are combined, producing an improvement in soundness indicators such as the ratio of substandard-and-below loans. After a merger, only the cooperative name changes, and branches operate as before. Member deposits are also transferred.
The Korean Federation of Community Credit Cooperatives (KFCC) has set normalization as this year's goal. In the year-end settlement of account, the arrears rate was in the 5% range, which is said to be within a stable zone. As of the end of June last year, the arrears rate was 8.37%, the highest in 20 years.
The financial authorities and the Ministry of the Interior and Safety, the ministry overseeing the KFCC, also launched a special management task force to swiftly deal with troubled cooperatives and plan to conduct joint inspections of 35 cooperatives in just the first half of this year. An official at the National Federation of Community Credit Cooperatives said, "If we work tirelessly, we expect to be able to get back on a normal track within the year." said.