Credit Union Asset Management Company to Launch Next Month with Detailed NPL Acquisition Standards

Enforcement Decree of the Credit Union Act Approved by Cabinet
Asset Management Company Operations and Criteria for Appointment of Standing Auditors Specified

The Credit Union Asset Management Company, which will be responsible for clearing the non-performing loans (NPLs) of credit unions, will begin operations next month.

On October 6, the Financial Services Commission announced that it had prepared a revised Enforcement Decree of the Credit Union Act. The amendment specifies the scope of non-business assets that the Credit Union Asset Management Company can purchase and sets standards for calculating the acquisition price of distressed assets.

According to the revisions, the non-business assets that the Credit Union Asset Management Company can acquire include: ▲ assets acquired by credit unions or the central union due to non-performing loans, ▲ fixed assets that must be disposed of as part of management or financial condition improvement measures, and ▲ fixed assets that are no longer used in business operations due to mergers, business transfers, or contract transfers.

The acquisition price of distressed assets must be determined based on objective prices, such as those assessed by appraisal firms, while also taking into account factors such as senior claims, security interests, and leasehold rights.

If it is difficult to determine the price in advance, a post-adjustment may be made between the acquisition price and the disposal price. In addition, the amendment includes provisions allowing the asset management company, when unavoidable in the course of acquiring, disposing of, or collecting distressed assets, to process resident registration numbers and other personal identification information.

This amendment aims to establish a comprehensive NPL management system for credit unions, comparable to those of asset management companies in other cooperative financial sectors such as the National Agricultural Cooperative Federation (NongHyup).

The criteria for appointing standing auditors of credit unions have also been clarified. The revised Credit Union Act delegates to the Enforcement Decree the definition of credit unions required to appoint a standing auditor, which is now specified as local or group unions with total assets of 300 billion won or more. However, it stipulates that certain credit unions belonging to religious organizations, incorporated associations, or occupational groups that meet specific criteria may be exempt from appointing a standing auditor.

Furthermore, in the case of credit unions not obligated to appoint a standing auditor, the revision allows those with total assets of 200 billion won or more to appoint a standing auditor if the board of directors deems it necessary for the purposes of soundness management, strengthening internal controls, or preventing financial incidents.

The Financial Services Commission expects that the amendment will ease the management burden on small and medium-sized credit unions, while also encouraging voluntary improvement of internal controls within credit unions.

The amended Enforcement Decree is scheduled to take effect from October 22. Regarding the Credit Union Asset Management Company, after completion of the procedures such as investment from the Korea Credit Union Central Association and the resolution of relevant supervisory regulations by the Financial Services Commission, the company will launch the acquisition of non-performing loans starting next month.

This content was produced with the assistance of AI translation services.