It has emerged that Ko Young-cheol, who took office in April as chair of the National Credit Union Federation of Korea (Shinhyup), increased the share of real estate project financing (PF) loans and nonmember loans while serving as a director at Gwangju Shinhyup. Shinhyup is currently facing a soundness crisis due to large losses and a surge in arrears, and the main cause is cited as local unions excessively expanding high-interest-margin real estate PF and nonmember loans.
According to the financial sector on the 8th, Shinhyup, which had posted a profit for 23 years since the foreign exchange crisis, recorded a loss of 341.9 billion won in 2024 and a loss of 327.7 billion won last year. Last year, even Seoul-area Shinhyup branches posted a loss of 192.0 billion won, and in 2024 the arrears rate rose to nearly 10%.
Shinhyup increased real estate PF loans in 2021, but as interest rates rose and a cold snap hit the PF market, loan repayment began to stall. This led to large losses and deteriorating soundness.
Ko was elected chair in recognition of the performance shown during his time at Gwangju Munhwa Shinhyup, where in 2021, when Ko served as a director, the union significantly increased new loans related to real estate and construction, including real estate PF. At the time, more than one-third of the total new lending to individual businesses went to real estate and construction. Nonmember loans also rose more than 22%, from 198.7 billion won in 2024 to 242.9 billion won in 2025.
A founding member of Gwangju Munhwa Shinhyup in 1993, Ko served as a director and was appointed the 8th chair in 2022, winning another term in 2024. During his tenure, Gwangju Munhwa Shinhyup posted a profit every year, and the number of members, which was 663 in the early days, increased to 41,597 as of the end of December 2025. However, the arrears rate rose sharply toward the end. The arrears rate jumped from 2.51% in 2023 to 4.20% in 2025.
After taking office, Ko put forward an asset management company (AMC) as a card to overcome the soundness crisis. The existing KCU NPL Loan, a subsidiary for disposing of bad debt, could only purchase bad debt up to 10 times its equity capital, and all of its capital had to be funded by the National Credit Union Federation of Korea. In contrast, an AMC has no asset limit regulation when purchasing bad debt and, if necessary, can borrow from the Depositor Protection Fund.
However, some in the industry say an AMC cannot be a fundamental solution. Even if an AMC purchases bad debt from local Shinhyup unions, it will be difficult to avoid losses unless the market normalizes.
There is also the issue of differing positions within Shinhyup. An industry official said, "Local Shinhyup unions want to sell bad debt as expensively as possible, and AMCs have no choice but to try to buy as cheaply as possible. If the gap between the two positions is large, disposing of bad debt may be harder than expected."