Increase in a Credit Line of Credit Union -NongHyup – SuHyup

As early as the next April, the credit line (per person) of the credit unions, the National Agricultural Cooperative Federation (NACF), National Federation of Fisheries Cooperatives and National Forestry Cooperatives will be extended. Also, except members of unions, normal people will be able to get the loan from the national credit unions.

On November 20, the ministry of finance and economy (MOFE) announced that it decided the law of the credit union containing such substances and a revised bill of an Enforcement Ordinance, and determined to present it to an extraordinary session of the National Assembly through meeting vice-ministers at the beginning of the next month. The revised bill will be enforced from next April or May three months after a proclamation date.

Under the revised bill, the credit line equivalent to 15% of equity capital will be changed into 1% of total assets for local unions and 3% of total assets for a workshop union and craft union.

The average equity capital of the credit union is approx. KRW 1.7 billion and total assets amount to approx. KRW 18 billion. Accordingly, in a simple theory, the credit line of the local union decreases from KRW 255 million to 180 million won. But, it is not right in practice.

The official of MOFE explained “As almost assets of local union is larger than the average, the credit line will be raised.” In addition, on the basis of June, among 1,239 unions, there are 180 unions of complete impaired capital and 117 unions of partial impaired capital. It means that there are many unions which cannot execute the normal loan business owing to insufficient equity capital.

The MOFE permits the credit unions to lend to non-members of union. But, it has been reviewing a measure to decrease the credit line of the same for the non-members of union.

The regulation of the credit line of the same from the law of credit unions will be applied to the member’s loan of the National Agricultural Cooperative Federation(NACF), National Federation of Fisheries Cooperatives and National Forestry Cooperatives. The official of MOFE said, “There are many the National Agricultural Cooperative Federation(NACF) and National Federation of Fisheries Cooperatives which have the impaired capital. When the new regulation is applied, the credit line of the same will be raised.”

The MOFE decided not to withdraw additional unions after withdrawing 115 credit unions. Also,it will protect up to KRW 50 million per person as now even though deposits of the credit union is not subject to the protection based on the law of the depositors protection from 2004.

The MOFE announced last month, “We have been reviewing the measure to withdraw some unions additionally in December by requirements of members of the National Assembly in a passing process of the revised bill of the depositor protection law, if the withdrawal of the credit union is insufficient.

In the revised bill, the external people not member of the union can be designated as officers to increase the management capability and health of the credit union. Also, the revised bill prescribes that a basic union with over the certain scale must receive the external auditing compulsorily.

Kwang-Am Cheon iam@donga.com