TITLE: South Korea's Financial Supervisory Service Tightens Risk Management Rules for Mutual Finance Cooperatives
BODY:
On March 2, 2026, South Korea's Financial Supervisory Commission (FSC) announced regulatory amendments to strengthen risk management at mutual finance cooperatives, including credit unions and mutual savings banks. The FSC will implement a notice of regulatory change from March 3 to March 16, 2026, with full amendments expected to be completed during 2026 following review by the Regulatory Reform Committee and FSC approval.
The amendments introduce four key measures to address concentrated high-risk lending. First, the FSC will improve the method for calculating expected recovery amounts for non-performing project finance (PF) loans by using official appraisal values, which will encourage proportionate reserve provisions aligned with actual risk levels. Second, the FSC will establish new lending limits, including a 20 percent cap on real estate PF loans, to prevent excessive concentration in high-risk lending categories. Third, the FSC will incrementally raise the minimum net capital ratio requirements for cooperatives and the financial improvement standards for credit unions. Fourth, the FSC will incrementally increase the management guidance ratio for the Mutual Finance Central Association to 7 percent.
These regulatory changes aim to enhance prudential oversight of mutual finance institutions and ensure more robust risk management practices. The amendments reflect the FSC's commitment to strengthening the stability of the cooperative finance sector and protecting depositors' interests through stricter capital and lending concentration requirements.
**Reference:**
Financial Supervisory Commission (South Korea), Press Release, March 2, 2026