Of the $17 billion secured by FSC for savings banks, $9.5 billion was used.
With eight suspensions and investigations into management scandals, savings banks have been a source of drama in the first half of 2011.
When Korea’s top regulator announced a series of measures to normalize the ailing sector during the latter half of the year on Monday, the “financial stability fund,” a new source of capital to prop up savings banks, drew notice.
This fund, the legal foundation of which was created as a precautionary measure to shore up liquidity for financial companies skating on thin ice during the global financial crisis, will go to savings banks considered financially sound - with Bank for International Settlements (BIS) capital adequacy ratios above 5 percent, an indication of bank solvency.
“In 2008, the discussion about establishing the financial stability fund came out when despite commercial banks having a BIS ratio of 11 percent, foreign investors wanted stronger assurances during the crisis,” said FSC Secretary General Kim Joo-hyun on Monday.
This unlikely source of money is the latest in a long list of funds being funneled into the savings bank sector.
Officials say that out of the 18.5 trillion won ($17 billion) secured by the FSC to use for savings banks’ normalization this year, some 10.2 trillion won has already been used.
In March, the FSC secured some 15 trillion won from the Korea Deposit Insurance Corp. (KDIC) “common account” that is normally used to compensate depositors for losses when a financial company collapses. Then the FSC gained parliamentary approval to use 3.5 trillion won from the KDIC’s separate “structural regulation fund” to restructure savings banks.
During the first half of this year, 4.8 trillion won was used to pay off depositors of eight suspended banks, while 1.4 trillion won was spent buying up bad PF loans in June. An estimated 3 to 4 trillion won is expected to be spent selling the seven remaining suspended banks, as the KDIC - which oversees the sale - has to make up for assets lost through embezzlement and other irregularities.
The industry will have a clearer picture when a sector-wide inspection ends in September. The remaining 8 to 9 trillion won could have to go to more bank bailouts.
“It’s impossible to tell how much the scale of the expense would be at this time,” said Kim.
Source: http://joongangdaily.joins.com
With eight suspensions and investigations into management scandals, savings banks have been a source of drama in the first half of 2011.
When Korea’s top regulator announced a series of measures to normalize the ailing sector during the latter half of the year on Monday, the “financial stability fund,” a new source of capital to prop up savings banks, drew notice.
This fund, the legal foundation of which was created as a precautionary measure to shore up liquidity for financial companies skating on thin ice during the global financial crisis, will go to savings banks considered financially sound - with Bank for International Settlements (BIS) capital adequacy ratios above 5 percent, an indication of bank solvency.
“In 2008, the discussion about establishing the financial stability fund came out when despite commercial banks having a BIS ratio of 11 percent, foreign investors wanted stronger assurances during the crisis,” said FSC Secretary General Kim Joo-hyun on Monday.
This unlikely source of money is the latest in a long list of funds being funneled into the savings bank sector.
Officials say that out of the 18.5 trillion won ($17 billion) secured by the FSC to use for savings banks’ normalization this year, some 10.2 trillion won has already been used.
In March, the FSC secured some 15 trillion won from the Korea Deposit Insurance Corp. (KDIC) “common account” that is normally used to compensate depositors for losses when a financial company collapses. Then the FSC gained parliamentary approval to use 3.5 trillion won from the KDIC’s separate “structural regulation fund” to restructure savings banks.
During the first half of this year, 4.8 trillion won was used to pay off depositors of eight suspended banks, while 1.4 trillion won was spent buying up bad PF loans in June. An estimated 3 to 4 trillion won is expected to be spent selling the seven remaining suspended banks, as the KDIC - which oversees the sale - has to make up for assets lost through embezzlement and other irregularities.
The industry will have a clearer picture when a sector-wide inspection ends in September. The remaining 8 to 9 trillion won could have to go to more bank bailouts.
“It’s impossible to tell how much the scale of the expense would be at this time,” said Kim.
Source: http://joongangdaily.joins.com
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