Moody's: Korea's MSB problems minimally affects commercial banks

Moody's believes that  distress among Korean mutual savings banks will have a minimal impact on  Moody's-rated commercial banks in Korea.

"Despite the likelihood of more MSB failures due to asset quality problems, these events are not likely to pose a
systemic threat to nor jeopardize the creditworthiness of Moody's-rated Korean commercial banks  due to four
reasons, and in line with Moody's previous opinion," says  Youngil Choi, a Vice President and Senior Analyst in
Moody's Financial  Institution Group.
 
" The customer bases of MSBs differ from those of the commercial banks, which reduces room for contagion. In
addition, differentials in regulatory standards between MSBs and commercial banks highlight the fact  that asset
quality transparency -- or lack of -- is more an issue for MSBs than the commercial banks," adds Choi.

MSBs are small individually and overall as a segment of the financial sector. This limits the impact of their
failures on the domestic financial markets.
 
The government is taking measures to curb the risk of increasing negative sentiment among depositors and obligors
of MSBs.