The Saemaul Geumgo Central Association will officially launch an asset management company next month and begin the resolution of bad debts amounting to 3 trillion won in the second half of the year.
According to the financial sector on the 30th, the Saemaul Geumgo Central Association will launch its subsidiary dedicated to bad debt resolution, the 'Saemaul Geumgo Asset Management Company (MG-AMCO),' on the 8th of next month.
This company will systematically receive applications for the sale of bad debts from Saemaul Geumgos nationwide and will sequentially purchase them. The Saemaul Geumgo plans to process more than 3 trillion won in bad debts in the second half of the year through this company. The company will have about 50 employees, including three dispatched from the Central Association. It is reported that the employee appointment process is nearly complete and that training is currently underway.
Bad debts in the Saemaul Geumgo are rapidly increasing due to problems in real estate project financing (PF) and others. As of the end of last year, the amount of fixed delinquent loans (bad debts) in the Saemaul Geumgo was 16.9558 trillion won, an increase of about 6 trillion won compared to the end of the previous year. During the same period, the arrears rate reached 6.81%, and the ratio of fixed delinquent loans was recorded at 9.25%.
Bad debts related to real estate PF are estimated to exceed about 5 trillion won. Financial authorities project that they will complete the resolution of 12.6 trillion won in bad PF projects by mid-year. The remaining scale of bad PF projects is 11.3 trillion won, with about half of these reportedly being Saemaul Geumgo business sites.
So far, the Saemaul Geumgo has resolved bad debts by selling them to MCI Lending, a subsidiary of the Central Association, and recovering them through its subsidiary, MG Credit Information. However, as the bad debts of the Saemaul Geumgo surged, the smaller-scale MCI Lending has found it increasingly difficult to purchase all of them.
The Central Association deemed a new company for bad debt resolution necessary and is establishing the asset management company. Once the company launches, the bad debt resolution operations, which have been divided between MCI Lending and MG Credit Information, will be integrated.
However, there are criticisms that establishing a subsidiary to resolve bad debts is not a fundamental solution. A financial sector official noted, "In the end, this may only create an illusion that the overall bad debts in the credit union have decreased by transferring bad debts to the subsidiary" and added, "However, in a situation where bad debts are surging, it is an urgent solution."