FSC notifies savings banks of reviews

After a lull since last year’s crisis, troubled savings banks are expected to face restructuring and possible suspension as early as next month.

Financial regulatory officials confirmed yesterday that multiple savings banks were notified last week of the results of on-site reviews that ended in late March.

The on-site reviews determined savings banks that need to submit turnaround plans, with a Bank for International Settlements (BIS) capital adequacy ratio of 5 percent or less - indicating a bank on the brink of insolvency - or savings banks with debts exceeding assets.

Unlike savings banks with a BIS capital adequacy ratio of between 1 to 5 percent, which are subject to turnaround “recommendations” or “requests” from financial regulators, savings banks with a BIS capital adequacy ratio of less than 1 percent receive a turnaround “order.”

Those with BIS ratios of less than 1 percent and debts exceeding assets are subject to suspension.

Regulatory officials declined to confirm the number of savings banks notified, but at least four savings banks were reportedly tapped for turnaround plans to be submitted after 15 days, according to officials.

The savings banks could be on thin ice after regulators review turnaround plans for approval or rejection - and the latter seems likely as at least one savings bank reportedly had a BIS ratio of less than 1 percent.

“We intend to carry out a speedy, transparent restructuring [of savings banks],” said Financial Services Commission Chairman Kim Seok-dong in an interview last week.

“Going forward, there will not be a large-scale, across-the-board restructuring, but we will reorganize the sector using constant restructuring using market [forces].”

Kim said he believes that even if additional savings banks are suspended, there are sufficient interested buyers in the market to resurrect the banks without trouble.

“There are many [buyers] who wish to acquire savings banks,” he said.

By Lee Jung-yoon [joyce@joongang.co.kr]