The Credit Union (Shinhyup) is suffering from management woes, including a high arrears rate and capital impairment at some local unions. Even so, labor-management conflict sparked by the election law violation case involving Chairman Ko Young-cheol continues, leaving the internal mood unsettled. The labor union says Chairman Ko should remove a person surnamed Choi, the planning director of the National Credit Union Federation of Korea, who received a suspension of indictment for alleged election law violations. Ko is said to have rejected the demand, calling it an "infringement of personnel authority."
According to the financial sector on the 29th, the arrears rate, which was around 1% to 2% in 2020, surged to 6.11% as of the end of June. That is the highest figure since 2012 (6.39%), 14 years ago. The corporate loan arrears rate rose from 2.47% in 2022 to 7.79% at the end of June this year.
Of the 862 credit union cooperatives nationwide, 166 are in a state of capital impairment. Capital impairment refers to a state in which corporations continue to post losses, depleting retained earnings in the coffers, and eroding the company's capital. Of the 166, 38 are in a state of complete capital impairment, with even the company's paid-in capital exhausted.
Credit union cooperatives mired in capital impairment are spread across the country, including Seoul, Incheon, Daegu, Gwangju and Busan. An industry official said, "Pushing real estate project financing (PF) too aggressively is turning into a risk of insolvency."
Amid this, the Shinhyup labor union recently staged a one-person protest at an event attended by about 300 Shinhyup executives. The union argues that Chairman Ko should remove Planning Director Choi from Shinhyup. It says that when Choi worked as a standing auditor at Gwangju Munhwa Credit Union, using business trip expenses—company funds—for illegal electioneering unrelated to auditing constituted embezzlement and breach of trust.
Earlier, Chairman Ko and Planning Director Choi were accused of violating the Act on Elections Entrusted by Public Organizations (entrusted election law) by visiting unit cooperative chairpersons with voting rights and asking for support at a time outside the 34th National Credit Union Federation of Korea presidential election period. The Daejeon District Prosecutors' Office last month issued a suspension of indictment for both.
Currently, directors of the National Credit Union Federation of Korea and cooperative chairpersons are said to have recommended to Chairman Ko that he dismiss Planning Director Choi. In response, Ko is said to have conveyed the view, "Personnel authority rests with me, and telling me to remove the planning director is an attempt to undermine my leadership. I cannot accept it." The union plans to gradually escalate collective action.
Starting in October, Shinhyup plans to operate an asset management company (AMC) to dispose of nonperforming loans. In the industry, there is a view that even if the AMC purchases bad loans from local credit unions, losses will be hard to avoid unless the market normalizes.