The financial authorities have announced a new regulation limiting real estate project financing (PF) loans for mutual finance institutions, including credit unions and agricultural cooperatives, to 20% of total loans. Additionally, the combined limit for loans in the real estate and construction sectors, along with PF loans, will be capped at 50% of total loans.
The Financial Services Commission (FSC) revealed on June 17 that it approved amendments to the 'Mutual Finance Supervision Regulations' during its regular meeting. This revision follows the 'Mutual Finance System Improvement Plan' announced in December 2025 and will take effect immediately. However, the PF loan limit regulation will be implemented starting April 1, 2027, to allow organizations time to prepare.
The criteria for estimating the expected recovery value of non-performing loans will also be tightened. The exceptions for using the final collateral appraisal value when calculating the expected recovery value of 'substandard loans' will be reduced. Non-performing real estate PF loans classified as substandard for an extended period will no longer be able to use the final collateral appraisal value in their recovery value calculations. This measure aims to prevent the overestimation of non-performing loan values and encourage the accumulation of provisions that align with the associated risks.
The soundness criteria for mutual finance cooperatives will be raised as well. The ratio of net capital to total assets will be increased to at least 4%. The recommended standard for improving the financial status of credit unions will gradually rise to 4% by 2031, with a minimum requirement of 0%.
The management guidance ratio for the Mutual Finance Central Association will also be increased to 7%, aligning it with savings banks. The FSC and the Financial Supervisory Service plan to continue enhancing the soundness and reliability of the mutual finance sector while also working on measures to restore its identity as a regional and community financial institution.
* This article has been translated by AI.
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