Major players including Tomato, Jeil fail to meet capital adequacy ratio
The financial regulator on Sunday suspended the operation of seven more savings banks that failed to meet the capital adequacy ratio set by the International Bank of Settlements, including major players Tomato and Jeil.
Sixteen savings banks have been suspended so far this year.
“We decided to suspend the seven institutions as part of the restructuring of the industry based on our inspection of asset quality and management abilities,” Financial Services Commission chairman Kim Seok-dong said in a press briefing.
The seven ― Jeil Savings Bank, Jeil 2 Savings Bank, Prime Savings & Finance Co., Daeyeong Savings Bank, Ace Mutual Savings Bank, Parangsae Savings Bank and Tomato Savings Bank ― are now suspended for six months starting effective immediately.
Customers of Tomato Savings Bank look at a suspension notice at a branch in Seongnam, Gyeonggi Province, after the Financial Services Commission suspended seven more savings bank on Sunday. (Yonhap News)
The order concludes a full-scale investigation of 85 savings banks from July and August, where some 340 inspectors from FSC, Korea Deposit Insurance Corp., and major accounting firms were dispatched to headquarters to sift through the banks’ financial statements. The process was designed to filter out lenders likely to survive on their own from those with little chance.
Customers can withdraw their deposits from Sept. 22, as it takes about three days to complete the list of large shareholders and management executives whose deposits should stay frozen due to wrongdoing. Each depositor can claim up to 50 million won ($46,900) guaranteed by the government.
“The FSC will forfeit assets of management executives who had concealed wealth at the expense of the banks’ declining financial standing. Those will be given out to depositors who hold more than 50 million won in their bank accounts,” the chairman said.
The country’s secondary banking sector has been struggling with high exposure to real estate projects.
The FSC have suspended nine savings banks earlier this year including then-industry leader Busan Savings Bank Group. The suspensions led to revelations of illegal project financing loans, graft scandals and a host of illegal practices which nonetheless did not threaten the banking system because of their small size.
The seven suspended savings banks have failed to raise their capital adequacy ratios above 1 percent, the regulator said. Their capital adequacy ratio ranged between minus 51.1 percent to minus 0.63 percent.
The seven can resume operations if they manage to significantly raise their deposit base and normalize their businesses within 45 days. Should they fail to do so, the state-run debt clearer KDIC will sell them or transfer their assets to a state-run secondary lender to resume operations within three months.
Kim Ju-hyun, a senior official at the regulator’s supervisory policy department, said the market shouldn’t expect more bank suspensions for the rest of the year.
“There’s still a lot of uncertainties in the industry so I cannot guarantee this 100 percent, but it would be almost impossible to suspend another within this year as it takes at least two to three months of inspection before we can make the ruling,” Kim said.
By Cynthia J. Kim (cynthiak@heraldm.com)
