Leading Korean savings bank, 3 others get biz suspension

Korean financial regulators on early Sunday morning suspended operations of Solomon Savings Bank, which is the top player in the domestic savings bank sector, Mirae Savings Bank, Korea Savings Bank and Hanju Savings Bank.

This came after the exit of nine other saving banks in the first round of savings bank restructuring in January last year and seven in the second round in July last year. Financial regulators have completed a string of activities for the restructuring drive.

In an interim meeting Sunday, the Financial Services Commission singled out four savings banks as underperforming financial institutions based on inspection results by the Financial Supervisory Service and reviews by the management assessment committee. Accordingly, it imposed a six-month suspension on the banks effective from Sunday.

The four banks will be banned from most business operations, including offering Internet banking and over-the-counter transactions, but will be allowed to conduct work for repayment of maturing promissory notes and rollover of maturing loans through Nov. 5.

Customers with a savings of up to 50 million won (44,000 U.S. dollars) at the banks, including principal and interest, will be guaranteed repayment despite the suspension. Those with more than 50 million won in savings and holders of the banks’ subordinate bonds will inevitably suffer losses, however.

The savings banks have a combined 8,100 customers each with savings exceeding 50 million won (44,000 dollars), and their combined deposits that exceed 50 million won amounts to 12.1 billion won (10.7 million dollars). They also have 7,200 investors in their subordinate bonds, and the combined value of their investments is 224.6 billion won (198 million dollars).

Kim Ju-yeon, chief of administration at the financial watchdog, said, "Restructuring savings banks that had gone on since last year has been completed with the latest measure,” adding, “From now on, a constant restructuring system will be put in place in the market.”

buddy@donga.com