Watchdog completes on-site inspection of 85 savings banks

SEOUL, Aug. 22 (Yonhap) -- South Korea's financial regulator has completed an on-site inspection of 85 local savings banks, officials said Monday, paving the way for overhauling the ailing sector.
South Korea has been grappling with salvaging the troubled sector as savings banks have been suffering from deteriorating asset quality due to soured construction loans.
The Financial Supervisory Service (FSS) and the Korea Deposit Insurance Corp. have recently completed an on-site inspection of the country's savings banks, and the FSS is preparing to set up follow-up measures, said a FSS official, without disclosing the results.
The regulator is slated to announce the inspection results and corresponding measures at the end of next month.
The inspection was designed to assess the financial health of savings banks, with a focus on their capital adequacy ratios stipulated by the Bank for International Settlement (BIS) standards.
In July, the Financial Supervisory Service and its executive body FSS had announced a set of measures to prop up the savings bank sector. The regulators said they will assess the financial conditions of local savings banks to determine viable players who would be eligible for public fund support.
Under the plan, savings banks whose capital adequacy ratios stand above 5 percent and are expected to maintain normal operation will be eligible to receive public funds to bolster their assets.
Players whose BIS ratios stand below 5 percent will be subject to regulatory advice. 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, according to the plan.
Savings banks whose BIS ratio falls below 1 percent will be required to submit plans for normalization. If their plans are approved, the respective savings banks will be given a three-month period for normalization.
Players who submit inappropriate plans for normalization or do not submit the relevant plans on time may be subject to business suspension.
South Korea has suspended business operations of nine savings banks this year.
mil@yna.co.kr