The Ministry of the Interior and Safety and the financial authorities are set to examine whether business loans from the Korean Federation of Community Credit Cooperatives (KFCC) were used for their intended purposes. Business loans are funds borrowed by sole proprietors or corporations to finance corporate operations, but cases are often uncovered in which the money is used to purchase dwellings. The Ministry of the Interior and Safety has supervisory authority over the Korean Federation of Community Credit Cooperatives (KFCC).
According to the financial industry on the 6th, the Ministry of the Interior and Safety (MOIS) recently asked the Financial Supervisory Service to share necessary standards for checking the misuse of business loans outside their stated purposes. As soon as the Financial Supervisory Service shares the standards, MOIS plans to coordinate the schedule with the Financial Services Commission and proceed with inspections of the Korean Federation of Community Credit Cooperatives (KFCC).
MOIS, together with the Financial Services Commission (FSC), the Financial Supervisory Service (FSS), and the Korea Deposit Insurance Corporation (KDIC), formed a special management task force (TF) for the Korean Federation of Community Credit Cooperatives (KFCC) in Dec. last year and is running a "special soundness management period" through June this year to improve the KFCC's management performance. The TF began special inspections of the KFCC in Feb., and it is also reportedly looking into the misuse of business loans outside their intended purposes.
However, because the TF is currently focused on the KFCC's soundness, it judged that it would be difficult to scrutinize business loan issues in detail and decided to conduct a separate inspection. The business loan misuse check will be carried out by MOIS based on materials received from the KFCC Federation, confirming whether relevant documentation during the lending process was properly provided.
The government recently signaled a tough inspection of real estate speculation through illegal or irregular loans. The financial authorities will conduct a full-scale review of all business loans executed since 2021 and plan intensive inspections focusing on areas with high speculative demand, such as the three Gangnam districts, and on vulnerable sectors such as secondary financial institutions. If illegal acts are identified, not only borrowers but also financial company employees and loan brokers will be reported to investigative authorities. Since the 30th of last month, the Financial Supervisory Service (FSS) has been conducting on-site inspections related to business loans at Hana Bank, NH NongHyup Bank, and the National Agricultural Cooperative Federation.
The National Tax Service plans to use funding plans and other documents to screen and verify cases in which high-priced apartments were acquired using business loans, and to launch comprehensive tax audits, including on tax evasion. If such cases are uncovered, whereas previously business loans were restricted only at the financial company involved, going forward all loans across the entire financial sector will be restricted.
An MOIS official said, "As other financial sectors have begun checks on the misuse of business loans outside their intended purposes, we plan to inspect the Korean Federation of Community Credit Cooperatives (KFCC) under the same standards."