ID :
192738
Mon, 07/04/2011 - 12:35
Auther :
Shortlink :
https://oananews.org//node/192738
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Swift and thorough restructuring of savings banks required
(Yonhap Editorial) SEOUL, July 4 (Yonhap) -- South Korea's financial regulator on Monday announced a plan to normalize the management of ailing savings banks on a selective basis. For this, the Financial Supervisory Commission (FSC) will launch an intensive assessment of the financial conditions of the 85 savings banks in July and August that will focus on their capital adequacy ratios as stipulated by Bank for International Settlements (BIS) standards.
Those who get a positive assessment will receive public funds to improve their financial status while the savings banks deemed "nonviable" will have to undergo business restructuring, including business suspension.
Among the banks whose capital adequacy ratios stand above 5 percent and are expected to maintain normal operations, those who wish will be eligible to receive public funds to bolster their assets. It will be the first time the government injects public funds into normally operating financial institutions for capital expansion.
Savings banks whose BIS ratios stand between 3-5 percent will be given up to six months for normalization, while those with BIS ratios of 1-3 percent will be granted up to one year for such efforts.
Savings banks whose BIS ratio comes below 1 percent will be requested to submit plans for normalization. If their plans are approved, the respective savings banks will be given a three-month period for normalization.
The FSC says only a limited number of savings banks will see suspended operations. However, some speculate that a number of savings banks will be kicked off the market. Some may face critical bank runs even before the results of the assessment are released.
What caused the savings bank industry to become so seriously troubled? Financial regulators allegedly hold substantial responsibility for savings banks' deepened woes. Their improper easing of regulations and failed supervision of the sector have contributed to insolvency in the sector.
The FSC has repeatedly stressed that the sector will not receive an injection of public funds.
Now it says further injections are inevitable because without them, a number of savings banks will be subject to business suspension upon the results of the financial assessment.
The financial regulators have been stepping up efforts to prop up the struggling sector. They have already agreed to inject 1.4 trillion won (US$1.3 billion) to buy up savings banks' bad property project finance loans and extend the maturity of these loans by up to two years.
The government is also seeking to sell seven troubled savings banks, including top player Busan Savings Bank, whose operations have been suspended since January. It has already sold one suspended savings bank to state-run Woori Finance Holdings Co., the country's No. 2 banking group.
If the injection of public funds into savings banks is as inevitable as regulators say, the liquidation of nonviable banks should be made completely and swiftly to minimize the impact on the market.
Those who get a positive assessment will receive public funds to improve their financial status while the savings banks deemed "nonviable" will have to undergo business restructuring, including business suspension.
Among the banks whose capital adequacy ratios stand above 5 percent and are expected to maintain normal operations, those who wish will be eligible to receive public funds to bolster their assets. It will be the first time the government injects public funds into normally operating financial institutions for capital expansion.
Savings banks whose BIS ratios stand between 3-5 percent will be given up to six months for normalization, while those with BIS ratios of 1-3 percent will be granted up to one year for such efforts.
Savings banks whose BIS ratio comes below 1 percent will be requested to submit plans for normalization. If their plans are approved, the respective savings banks will be given a three-month period for normalization.
The FSC says only a limited number of savings banks will see suspended operations. However, some speculate that a number of savings banks will be kicked off the market. Some may face critical bank runs even before the results of the assessment are released.
What caused the savings bank industry to become so seriously troubled? Financial regulators allegedly hold substantial responsibility for savings banks' deepened woes. Their improper easing of regulations and failed supervision of the sector have contributed to insolvency in the sector.
The FSC has repeatedly stressed that the sector will not receive an injection of public funds.
Now it says further injections are inevitable because without them, a number of savings banks will be subject to business suspension upon the results of the financial assessment.
The financial regulators have been stepping up efforts to prop up the struggling sector. They have already agreed to inject 1.4 trillion won (US$1.3 billion) to buy up savings banks' bad property project finance loans and extend the maturity of these loans by up to two years.
The government is also seeking to sell seven troubled savings banks, including top player Busan Savings Bank, whose operations have been suspended since January. It has already sold one suspended savings bank to state-run Woori Finance Holdings Co., the country's No. 2 banking group.
If the injection of public funds into savings banks is as inevitable as regulators say, the liquidation of nonviable banks should be made completely and swiftly to minimize the impact on the market.
