Korea suspends 2 more savings banks

South Korea suspended the operations of two more savings banks.

The Financial Services Commission announced halting the operations of Seoul Savings Bank and Youngnam Bank.

Repercussions of the move are not expected to be severe since the contracts from these two banks will be moved to two other banks, and will be operating under different names.

These two banks were established under a government policy to shoulder and launder the bad debts of second tier savings banks, and the Korea Deposit Insurance Corp. is the single majority shareholder in both entities. 

Seoul Savings Bank is an affiliate of the embattled Woongjin Group, which recorded a BIS ratio of -5.55 percent as of the end of September last year.

Youngnam had been under the management of the state-run insurance corporation since its parent company was eliminated from the market.

Youngnam’s capital erosion rate had reached almost 95 percent, indicating it was worth almost nothing at the point of the FSC suspension.

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