Savings banks seek state funds

Several banks hope to tap Financial Market Stabilization Fund


A number of savings banks are seeking state help in securing additional capital, sources said Thursday.

“Some of the savings banks have shown interest in receiving support through the Financial Market Stabilization Fund,” an unnamed official with the Financial Services Commission was quoted as saying by a local news agency.

According to industry sources, three or four savings banks are seeking state funds.

“It is expected that applications will come when the deadline, on the coming 21st, is imminent.”

An official at the Korea Finance Corp., which operates the Financial Market Stabilization Fund, was also quoted as saying that a number of savings banks have shown interest and that the organizations will be briefed on the issue next week.

According to industry sources, this is the first time stable savings banks that meet the Financial Services Commission’s standards for financial stability.

The Financial Market Stabilization Fund was set up during the global financial crisis as a support measure for financial companies. The fund is available to savings banks with capital adequacy ratios between 5 and 10 percent, and at the end of June there were 24 savings banks that met the criteria.

The program provides capital in form of matching funds with five to seven-year maturity, where the largest shareholder of the institution receiving support raise capital equal to the amount provided by the state-operated fund.

If the shareholder is unable to match the figure, the total amount of funds provided can be increased through other means including offering collateral for the loan.

Savings banks that receive funds through the program are subject to restrictions regarding dividends and salaries. In addition, such institutions will be required to make improvements under the direction of the Korea Finance Corp. if negative changes such as falling capital adequacy ratio occur.

By Choi He-suk (cheesuk@heraldcorp.com)