Three months after the financial authorities issued timely corrective measures to two savings banks, they are considering imposing a "management improvement recommendation" on Sangsangin Savings Bank, ranked 10th in assets. Timely corrective measures require financial companies showing signs of deterioration to make immediate improvements, and among these, a management improvement recommendation is the lowest level of advice, suggesting increases in capital and disposals of non-performing assets.
According to the financial sector on the 17th, the Financial Services Commission will hold a regular meeting on the 19th to present and vote on agenda items regarding timely corrective measures for four savings banks. Earlier, the Financial Supervisory Service conveyed to the Financial Services Commission the results of a management status evaluation in January, which indicated a poor rating of 4th level (vulnerable) for four savings banks in terms of asset soundness. This list reportedly includes Pepper Savings Bank, ranked 7th in asset size, and Sangsangin Savings Bank, ranked 10th.
According to the supervisory regulations for the savings bank industry, if the comprehensive assessment rating of the management status evaluation is at level 3 or if the asset soundness or capital adequacy assessment rating is level 4 or lower, that institution becomes a target for timely corrective measures by the financial authorities. Timely corrective measures increase in severity from management improvement recommendations to management improvement demands and management improvement orders, with business suspension and executive job suspensions corresponding to management improvement orders.
The Financial Services Commission is reportedly likely to issue a management improvement recommendation to Sangsangin Savings Bank. As of the end of the third quarter last year, Sangsangin Savings Bank's delinquency rate was 15.06%, significantly higher than the industry average of 8.7%. The ratio of non-performing loans (NPL) stood at 22.27%, also above the industry average of 11.2%. Based in Gyeonggi Province, Sangsangin Savings Bank has total assets of 2.7577 trillion won, ranking 10th in the industry. Although Pepper Savings Bank, ranked 7th in assets, was also likely to receive a management improvement recommendation, it increased its capital by 30 billion won earlier this year, avoiding scrutiny from the authorities. It is also reported that timely measures are likely to be deferred for the remaining two companies.
Additionally, there are reports that 2 to 3 more savings banks could be classified as targets for timely corrective measures. The Financial Supervisory Service is currently conducting management status evaluations of other savings banks based on the soundness indicators as of the end of September last year. There are predictions that more savings banks may find themselves undergoing the financial authorities' restructuring process.
The industry is concerned about the repercussions of the Financial Services Commission's actions. When the Financial Services Commission issued management improvement recommendations to Anguk and Raon Savings Banks in December last year, a bank run did not occur; however, this time, because the targets are large savings banks primarily operating in Seoul and the metropolitan area, there is less confidence.
The financial authorities plan to closely monitor any unusual trends in savings bank deposits. A Financial Services Commission official noted, "There were no signs of deposit outflow when management improvement recommendations were issued to Anguk and Raon Savings Banks," adding that they are conducting daily monitoring of savings bank deposit trends in collaboration with the Financial Supervisory Service and the Korea Deposit Insurance Corporation. Another official from the financial authorities stated, "Consumers know that even if a financial company goes bankrupt, deposits up to 50 million won per person are protected," and added, "Unlike during the savings bank crisis of 2011-2012, because business operations are being conducted normally, there is less likelihood that financial consumers will be agitated or anxious."