The Ministry of the Interior and Safety is out of step with the financial authorities as it conducts research on ways to strengthen the supervisory system and role of mutual finance institutions. In the financial sector, some interpret this as the ministry in charge of the Korean Federation of Community Credit Cooperatives (KFCC) engaging in a power struggle with the financial authorities over supervisory authority.
According to relevant ministries and the financial sector on the 12th, the Ministry of the Interior and Safety (MOIS) recently launched a commissioned study titled "The role of mutual finance institutions and supervisory system for revitalizing local communities." The MOIS will analyze the supervisory systems of NongHyup, the National Federation of Fisheries Cooperatives, the National Forestry Cooperatives Federation, credit unions, and the Korean Federation of Community Credit Cooperatives (KFCC), and study supervisory cases in advanced overseas countries. Based on this, it plans to prepare measures to improve the supervisory system for mutual finance institutions.
The Ministry of the Interior and Safety (MOIS) said, "Mutual finance institutions differ from commercial banks in characteristics such as governance structure. Research is needed on the roles of these financial institutions and their supervision, taking this into account."
Through this study, the Ministry of the Interior and Safety (MOIS) will also prepare measures to redefine the role of mutual finance institutions. Specifically, it plans to strengthen relationship banking functions closely tailored to local residents and local businesses, and prepare measures such as expanding local investment and equity participation functions to revitalize local communities.
The financial authorities are somewhat perplexed by the MOIS's launch of the commissioned research. The MOIS is the ministry in charge of the Korean Federation of Community Credit Cooperatives (KFCC), yet it is conducting research targeting the entire sector of mutual finance institutions.
A government official said, "We understand this as a commissioned study to prepare for discussions at the end of this year on redefining the supervisory system and role of the Korean Federation of Community Credit Cooperatives (KFCC)." The idea is that the research is to prepare for discussions on improvement plans for mutual finance institutions, including the KFCC, going forward.
Some interpret this as the financial authorities and the Ministry of the Interior and Safety (MOIS) competing for the lead over supervisory authority for the Korean Federation of Community Credit Cooperatives (KFCC). President Lee Jae-myung said in September last year that the KFCC was in a blind spot for management and supervision and asked relevant ministries to strengthen oversight.
Since then, the MOIS, the Financial Services Commission, and the Financial Supervisory Service have discussed measures such as transferring supervision of the Korean Federation of Community Credit Cooperatives (KFCC). Although there was speculation that the financial authorities would take over supervisory authority, the direction settled on allowing the MOIS to retain supervisory authority while strengthening joint inspections with the financial authorities.
This year, the financial authorities have tightened oversight by capping the target growth rate for household loans by the Korean Federation of Community Credit Cooperatives (KFCC) at 0%. In response, as the MOIS embarked on commissioned research covering all mutual finance institutions, a standoff has taken shape. A financial industry official said, "The financial authorities have focused on soundness and household debt management, while the MOIS is pursuing win-win finance to revitalize local economies, so there is also a difference in perspectives between the ministries."