Credit unions win approval to set up asset management firm, targeting bad loans by year-end

The National Credit Union Federation of Korea has received approval from the Financial Services Commission to invest in establishing an asset management subsidiary, with plans to complete incorporation this month and begin purchasing non-performing loans before year-end.

The federation said Friday it received FSC approval on Wednesday to fund the creation of the Credit Union Asset Management Company.

The federation has been coordinating with financial regulators, drawing up establishment and operational plans, and revising related regulations in accordance with an amended Credit Unions Act promulgated on April 21. Following the approval, it plans to complete corporate and business registration this month, then hire staff and build operational systems before launching non-performing loan purchases by year-end.

However, the actual scale of non-performing loans to be purchased and the specific criteria have not yet been finalized. "We are currently conducting a survey of member unions to gauge demand for non-performing loan purchases," a federation official said. "The specific scale and criteria will be determined after the asset management company is incorporated."

The new asset management company plans to start with buying and selling non-performing loans, then expand its scope to include credit investigations and debt collection for borrowers. The aim is to centralize management of non-performing loans from individual unions, improve the efficiency of asset resolution, and support the recovery of financial soundness and normalization of union operations.

"This approval is an important stepping stone for strengthening the credit union sector's non-performing asset management framework," federation President Ko Young-cheol said. "We will work to establish the Credit Union Asset Management Company as a specialized institution that manages non-performing loans professionally and systematically, and supports unions in restoring financial health and normalizing operations."