The government is said to begin discussions on redefining the role of mutual finance institutions and overhauling the supervisory framework after the June 3 local elections. As Kim Yong-beom, the presidential senior secretary for policy, criticized mutual finance institutions, saying they are "not fulfilling their role as financial institutions for ordinary people," sweeping reform measures are expected.
According to the financial sector on the 12th, relevant ministries recently held a meeting to discuss measures to strengthen the soundness of sectors such as the Korean Federation of Community Credit Cooperatives (KFCC) and other mutual finance institutions.
At the meeting, the status of inspections of the Korean Federation of Community Credit Cooperatives (KFCC) jointly under way by relevant ministries was said to have been shared. The financial authorities and the Ministry of the Interior and Safety have been conducting joint inspections of the KFCC since February. They recently began inspections of KFCC branches located in Gyeonggi and North Jeolla. The government plans to carry out the joint inspections through the first half.
The financial sector expects reforms of mutual finance institutions to gain full steam after the joint inspections of the KFCC. Mutual finance institutions such as NongHyup, the KFCC, and the credit union were established to supply funds to ordinary people and vulnerable groups through relationship-based, community-rooted finance, but they face criticism for focusing on high-credit borrowers and real estate lending. The share of real estate and construction loans at mutual finance cooperatives (credit union, agricultural cooperative, fisheries cooperative, forestry cooperative) expanded from 4.9% in 2015 to 23.7% in 2025.
Deputy Minister Kim Yong-beom recently took aim at mutual finance institutions, saying "money is not flowing to those who need it," and publicly called for a realignment of their role as institutions for ordinary people. The industry expects tough regulatory measures that would put the brakes on such business practices by mutual finance institutions. The Financial Services Commission also plans to form, this month, an inclusive finance task force (tentative name) to discuss ways to redefine the role of the secondary financial sector, including mutual finance institutions.
In the financial sector, there is also talk that the transfer of supervisory authority over the KFCC remains a live "spark." The government last year discussed transferring supervisory authority over the KFCC from the Ministry of the Interior and Safety (MOIS) to the financial authorities. The government agreed to keep supervisory authority over the KFCC with the MOIS while conducting joint inspections with the financial authorities. Based on the results of the joint inspections, the government decided to revisit improvements to the supervisory framework for mutual finance institutions in the second half of this year.