A view of the Financial Services Commission at the Government Seoul Complex. /Courtesy of News1

Ahn Guk Savings Bank and Raon Savings Bank received timely corrective measures from financial authorities. The financial authorities noted that improvement is needed in the asset soundness of the two savings banks and issued a management improvement recommendation, which is the lowest level of timely corrective action.

Timely corrective measures are actions taken when the evaluation results of a financial institution's management condition indicate a significant need for improvement. Timely corrective measures are classified into recommendations, requests, and orders. Financial institutions that receive timely corrective measures from financial authorities must implement measures such as disposing of bad debts, increasing capital, and restricting dividends.

The Financial Services Commission held its 22nd regular meeting on the 24th and stated that it imposed a management improvement recommendation on Ahn Guk Savings Bank and Raon Savings Bank. Initially, SNT Savings Bank was also subject to the management condition evaluation, but the Financial Services Commission deferred the management improvement recommendation considering that the soundness indicators of the savings bank had already improved.

As of the end of September, Ahn Guk Savings Bank and Raon Savings Bank had capital ratios of 13.2% and 10.9%, respectively, based on the International Settlements Bank (BIS) standards. This exceeds the regulatory ratio of 7%. However, the financial authorities conducted a management condition evaluation considering that the soundness indicators had temporarily deteriorated during the normalization process of real estate project financing (PF).

The two savings banks that received management improvement recommendations are advised to dispose of bad assets, increase capital, and restrict profit distributions. Mandatory disposals related to operations are not included. The two savings banks can operate normally during the six-month implementation period.

Additionally, if the financial authorities recognize that the management condition has sufficiently improved during the implementation period of the management improvement recommendation, they plan to terminate the recommendation even before the end of the implementation period following a resolution from the Financial Services Commission.

The Financial Services Commission expected that the impact of this action on the financial market will be limited. An official from the Financial Services Commission noted, 'The financial authorities will maintain a strict soundness management system for savings banks in accordance with principles and procedures,' and added, 'We will proactively prevent the occurrence of insolvency and encourage savings banks to secure competitiveness.'