Starting in April next year, mutual finance institutions such as credit unions, NongHyup, Suhyup, and forestry cooperatives will not be allowed to extend real estate project financing (PF) loans in excess of 20% of their total loans. The combined limit for real estate, construction, and real estate PF loans is capped at 50% of total loans.
The Financial Services Commission approved revisions to the Mutual Finance Institutions Supervisory Regulations with these provisions at a regular meeting on the 17th.
The revisions are a follow-up to the mutual finance institutions system improvement plan released in December last year. The PF loan limit regulation will take effect on Apr. 1 next year, allowing time for the cooperatives to prepare.
The framework for estimating recoverable amounts on nonperforming loans will also be improved. When estimating the recoverable amount of "substandard and below" exposures, the exception allowing use of the final collateral appraised value will be permitted only once, and only when legal proceedings are scheduled to commence within three months. For long-standing nonperforming real estate PF loans classified as substandard and below, the final collateral appraised value may not be used when estimating the recoverable amount.
The net capital ratio to total assets standard will be raised to at least 4%. The management guidance ratio standard of the mutual finance institutions central associations will be raised to 7%, the same level as savings banks.