Mid-size savings bank files for bankruptcy

SEOUL, May 20 (Yonhap) -- A mid-size savings bank filed for bankruptcy on Friday, a Seoul court said, heralding a series of business failures in the sector staggering under mounds of distressed property loans.
Samhwa Mutual Savings Bank filed for bankruptcy after being suspended by financial authorities in January, the Seoul Central District Court said.
The Financial Services Commission (FSC) halted operations of the troubled savings bank due to its capital shortage, which crippled the bank's ability to meet deposit withdrawals.
The bankruptcy application came after the deposit insurance agency Korea Deposit Insurance Corp. sold the bank's assets and debts to Woori Finance Holdings Co., the second-biggest financial group. Control of suspended banks, which fail to replenish capital and normalize business, is transferred to the deposit insurance firm.
The court said it will decide whether to permit the bankruptcy after taking related processes.
Other troubled savings banks may follow suit, industry officials said.
After suspending seven other cash-short savings banks in February, the FSC said it will sell the banks' assets to other financial firms unless they fail to replenish their weak capital holdings.
The savings banks sector is staggering under hefty soured project financing loans issued to builders who could not repay them due to a prolonged real estate market slump.
pbr@yna.co.kr