Samhwa Mutual Savings Bank declared bankrupt

The Samhwa Mutual Savings Bank, one of the local banks troubled with capital shortages, was declared bankrupt Friday.

The savings bank filed for bankruptcy on May 19. In January, the Financial Services Commission suspended the bank for six months during moves to weed out unviable banks that failed to meet regulatory capital requirements.

The ill-fated bank has been criticized for its allegedly illicit lending and other corrupt acts, for which its honorary chairman Shin Sam-gil was detained and indicted last month.

The Seoul Central District Court said that in line with the depositor protection law, the Korea Deposit Insurance Corporation was appointed as a trustee in bankruptcy that will take charge of managing and disposing of all the bank’s assets.

The court will oversee the tasks carried out by the bankruptcy administrator, officials said.

KDIC will examine all assets of the bank including its bonds and share them with creditors later, court officials said. Creditors can report their holdings of the bank bonds to KDIC until August 12. The first meeting of the creditors is set for Sept. 8.

The state financial regulator’s suspension of the bank came after its Bank for International Settlements ratio ― the capital adequacy ration ― was 1.42 percent. Currently, savings banks are required to keep their BIS ratio at 5 percent or above.

The government is trying to come up with measures on ailing local savings banks. It seeks to put seven teetering savings banks up for sale this year. The banks have been suspended due to a pile-up in soured construction loans and weak capital positions.

By Song Sang-ho (sshluck@heraldcorp.com)