Four savings banks suspended

The Financial Services Commission suspended operations of four savings banks on Saturday, following its similar sanction against three debt-saddled players since January.

The regulator announced that it halted businesses of Busan II Savings Bank, Jungang Busan Savings Bank, Jeonju Savings Bank and Bohae Savings Bank for six months until Aug. 18.

The series of measures against distressed savings banks come as part of financial regulators ongoing restructuring of the secondary banking sector hit by toxic construction debt.

Like the three -- Samhwa, Busan and Daejeon savings banks -- which were earlier subject to business suspension, the four banks have also faced cash flow crisis, the FSC said in a statement.

“Though liquidity status of the four banks was better than that of Busan and Daejeon savings banks, they saw a huge number of customers withdraw their deposits (amid recent woes in the savings banking sector),” the FSC said.

The cash flow problem in the secondary banking industry emerged in the wake of the sluggish real estate sector since the 2008 global financial crisis.

FSC Chairman Kim Seok-dong has recently hinted that distressed banks could put it up for auction to find a preferred bidder if they continue to see its financial soundness stand at a weak level.

“During the process of restructuring (of the secondary banking industry), there could be ones to become the M&A targets,” he said.

Last Thursday, the regulator suspended operations of Busan Savings Bank, the No. 1 in the industry in assets, and its subsidiary Daejeon Savings Bank for six months until Aug. 16.

Last month -- in an initiative action -- the FSC suspended operations of Samhwa Savings Bank for six months. It has already been placed in the M&A market.

By Kim Yon-se (kys@heraldcorp.com)