Gov't orders 7 savings banks to suspend operations

(ATTN: UPDATES with details throughout) By Lee Minji SEOUL, Sept. 18 (Yonhap) -- South Korea's government regulators on Sunday ordered seven ailing savings banks, including major players Tomato and Jeil, to suspend operations following a detailed review of their capital adequacy ratios. 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. Business operations at the seven players -- 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 -- were suspended for six months starting at noon on Sunday, according to the financial regulators. "The measure has concluded efforts to overhaul the savings bank sector ... The dissipation of uncertainties over the savings sector will help stabilize the problem, which has been criticized for causing fear in the local finance industry," Financial Services Commission Chairman Kim Seok-dong said in a press briefing. The move comes after financial regulators completed an inspection of 85 local savings banks, with a focus on their debt situations and capital adequacy ratios stipulated by the Bank for International Settlements (BIS) standards. The financial regulators said the BIS ratios of the affected savings banks came in below 1 percent and their debts outweighed their assets. The suspended players are set to resume operations if they succeed in normalizing their businesses within 45 days. If they fail to do so, the state-run Korea Deposit Insurance Corp. (KDIC) plans to sell the seven players or transfer their business contracts to a KDIC-run savings bank in a bid to resume operations within three months, the financial regulators said. The financial regulators said they plan to support capital expansions at savings banks whose BIS ratios exceed 5 percent but wish to raise it to a 10 percent level. Deposit holders of the seven savings banks will be allowed to withdraw part of their holdings starting Thursday. South Korea has suspended 16 savings banks this year.