Buried in debt, two savings banks file for bankruptcySolomon Mutual Savings Bank and Korea Savings Bank have filed for bankruptcy, according to an official from the Seoul Central District Court yesterday.
The Korea Deposit Insurance Corporation (KDIC), the creditor of the two savings banks, submitted the bankruptcy petitions. Based on an inspection out last year by the Financial Supervisory Service, Solomon Mutual Savings Bank has 362.3 billion won ($323.7 million) more in debt than it does in assets, while Korea Savings Bank’s debt exceeds its assets by 46 billion won. The debt that led to the bankruptcies has been attributed to depressed demand for real estate loans.
Last May, the Financial Services Commission suspended the operations of the two banks for six months and urged them to take steps to improve their businesses. The condition was that the banks expand their capital or be sold to another party. The KDIC, however, yesterday reported the bankruptcy filings after seeing little chance of meeting the condition.