Banking: Korea intervenes in failing banks
Korea's Financial Services Commission has suspended three savings banks (plus subsidiaries of two of them) for six months while attempts are made to rescue them.
Korea's savings bank sector is in serious trouble: Busan Savings Bank, the country's biggest, was suspended last Thursday, along with one of its subsidiaries, after failing to meet capital requirements.
On Saturday, more banks, including three more subsidiaries of Busan, were also suspended.
The decision was taken to suspend banking operations (but not receipt of payments on loans) to prevent a run on savings banks as South Koreans begin to worry about the economy, the political situation and possible conflict with the North.
But also causing concern is that a number of banks are over-exposed to speculative house building, a sector which is in decline and where corporate insolvencies are growing.
The FSC plans to review the balance sheets of the banks and their lending portfolios with a view to taking over bad loans. Korea has a "bad bank," the Korean Asset Management Corp. which was formed with taxpayer money for this purpose. But there are also plans to "increase liquidity" in the sector which hints at public investment in or loans to banks.
The suspension is, at this point, set to expire on 18 August for the banks suspended on Saturday and two days earlier for those marked * in the list below.
The banks concerned are:
Busan II Savings Bank,
Jungang Busan Savings Bank,
Jeonju Savings Bank
Bohae Savings Bank
Busan Savings Bank*
Daejeon Savings Bank*
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