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RETAIL BANKING | Cesar Tordesillas, Korea

Another Korean savings bank fiasco looming

South Korea's financial regulators have begun sorting out 94 savings banks which survived the previous three rounds of expulsions.


As a result, up to eight savings banks have been put on a hit list for their poor financial standings.

The Korea Deposit Insurance Corp. is poised to inspect about five small- and medium-sized savings banks beginning from June 18. The Financial Supervisory Service is reportedly looking into three large secondary banks.

Their actuations are indicative that another round of suspensions may occur late this year.

According to the FSS, about half of 94 banks posted losses in the first quarter of the year.

Bank for International Settlements (BIS) capital ratios, a key indicator of financial soundness, for over 10 banks were below 3 percent. Banks are normally required to maintain a BIS ratio over 8 percent.

The KDIC said the upcoming inspection will try to ascertain the financial status of several struggling savings banks but denied that more could be suspended in the near future.

``Rather than uncover irregularities, we will try to grasp their situation and help them resolve problems. The planned investigation does not necessarily mean restructuring of the savings banking sector,’’ a KDIC official said.

In the past, the state deposit insurer was authorized to investigate those with BIS ratios lower than 5 percent. But since March, it has been allowed to audit any savings banks showing signs of capital erosion and other financial distress.

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