Korea's watchdog to support ailing savings banks

South Korea's Financial Services Commission pledged to supply liquidity and buy distressed property-linked loans to help ailing savings banks.

"The government will draw up a set of supportive measures to minimize the inconvenience of depositors and stabilize the business of savings banks," the FSC said.

 FSC Chairman Kim Seok-dong visited the port city of Busan to hold a meeting with related agencies to discuss measures to bolster the ailing savings banks sector and fend off a bank run.

The financial regulator on Saturday suspended four savings banks, including three affiliates of the country's largest savings bank, Busan Savings Bank, for six months, citing liquidity crunches sparked by recent deposit withdrawal.

 The decision came only two days after the FSC suspended Busan Savings Bank and one of its affiliates after they failed to meet regulatory capital requirements.

The FSC said the industry organization for savings banks will expand the supply of liquidity to the sector by easing regulations on the fund supply and extending maturity for already-provided liquidity.

It added the government will seek to buy sour property-linked loans extended by savings banks through public funds managed by the state debt clearer Korea Asset Management Corp.