Savings banks may get to escape suspensionsFinancial regulators may change the way they go about restructuring troubled savings banks, according to a senior official at the Financial Services Commission (FSC).
Under the proposed plan, the banks’ assets and liabilities that are currently being managed by the Korea Deposit Insurance Corporation (KDIC) would be transferred to a bridge bank, meaning the savings banks could resume their operations.
The new measure is being discussed as the FSC sees no need to keep suspending their operations, the official added.
“We plan to transfer the assets and liabilities of those troubled savings banks to our bridge bank over one weekend after they have closed for business,” the official said. “They would then be able to open for business as usual from the following Monday under its management.”
The official added that the affiliates of the already suspended savings banks, and those banks that are being whipped into shape by the KDIC, would be affected by the new changes.
The FSC produced a list of debt-ridden savings banks and suspended their operations for six months last year. During this period, they were required to submit outlines of how they intend to improve.
A bridge bank refers to a temporary financial institution - in this case, organized by the KDIC - that is able to administer the deposits and liabilities of ailing institutions until new buyers can be found.
The financial regulators have suspended about 20 debt-ridden savings banks since last year due to their high risk of insolvency triggered by lax and in some cases illegal management, and cases of embezzlement.
The number of people who kept deposits of over 50 million won in savings banks has diminished sharply from last year as panicked depositors rushed to banks to withdraw their money after the scandal broke. The law protects deposits up to this amount.
“If the extent of the corruption committed by the savings banks is not deemed by the FSC to be that serious, the banks will not be suspended and will have their assets handed over to the state-run deposit insurance agency,” he added.
Insiders said Tomato II Savings Bank is likely to be the first to benefit from the plan. According to the financial regulator, only 30 customers had deposits of over 50 million won ($44,025) with it.
The FSC said that Solomon Savings Bank, Korea Savings Bank and Hanju Savings Bank will all start operating again from Monday under new ownership.
The commission approved Woori FG Savings Bank’s acquisition of Solomon Savings yesterday, as well as Hana Savings Bank’s acquisition of Korea Savings.
By Kim Mi-ju [firstname.lastname@example.org]
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