Korea’s deposit insurance agency said Monday it plans to put most of the seven suspended savings banks up for sale from as early as this month as part of the country’s widening efforts to revamp the ailing financial segment.
In February, the country’s financial regulator Financial Services Commission (FSC) suspended the savings banks, including top player Busan Savings Bank and its four affiliates, for six months due to their insufficient capital to meet depositors’ withdrawal demands.
“Most of the seven savings banks suspended in February are likely to be put up for sale as they were found to have negative capital,” Korea Deposit Insurance Corp. (KDIC) Chairman Lee Seung-woo said. “The KDIC will start to put the banks up for sale from end-April or next month.”
The sale is grounded on local law ordering savings banks with negative capital to go bankrupt or be sold, he said.
Lee added the country has secured enough in funds to support the savings bank sector revamping efforts in which the deposit insurance agency will replenish the capital shortages of the suspended banks before finding a new owner for them.
His comments came as the country is mustering efforts to prop up the savings bank sector reeling from burgeoning defaults on loans extended to builders.
In mid-March, Korea unveiled a package of new rules to limit savings banks’ risky assets and boost responsibilities of major savings bank shareholders as part of the restructuring efforts.
Woori Finance Holdings Co., the second-biggest banking group, took over Samhwa Mutual Savings Bank, which was suspended by the FSC in January, and resumed the bank operations under its wing last month.
Three other banking giants, including top player KB Financial Group Inc., have also pledged their willingness to take over one or more of the troubled savings banks.