The number of insolvent savings banks that received a rating of 4 (weak) and 5 (dangerous) in the evaluation of the management status of Saemaul Geumgo has increased by 79 over the past six months. The rapid increase in insolvent savings banks is unprecedented in the history of Saemaul Geumgo.
According to the financial sector on the 28th, the Saemaul Geumgo Central Association conducted an evaluation of the management status of 1,267 savings banks nationwide for the first half of this year. The results showed that 157 savings banks received a rating of 4, and 8 received a rating of 5, totaling 165. This is nearly double compared to 86 banks at the end of 2024. During the same period, the number of banks with a rating of 4 increased by 80, while the number of banks with a rating of 5 decreased by 1.
The management status evaluation determines a comprehensive rating based on five criteria: capital adequacy, asset soundness, revenue, liquidity, and management control. A rating of 3 indicates a recommendation for management improvement, 4 indicates a demand for management improvement, and 5 indicates an order for management improvement. In particular, a rating of 4 is subject to review for restructuring, such as mergers, while a 5 rating is assessed as a dangerous level that could consider liquidation if necessary.
Based on the first half of this year, there were 80 savings banks rated 1 (excellent) and 484 rated 2 (good). Compared to the end of last year, this represents decreases of 17 and 123, respectively. In contrast, the number of savings banks rated 3 (normal), which are subject to improvement recommendations, increased from 476 to 538, reflecting a 13% increase (62 banks). Thus, the number of banks rated 3 to 5 now constitutes more than half of all savings banks.
The situation of the local savings banks, the roots of Saemaul Geumgo, is more serious, excluding workplace savings banks deemed profitable and stable, which can only be used by employees of large corporations like Samsung Electronics and Hyundai Motor. Based on the first half of this year, only 27 out of 1,174 local Saemaul Geumgo banks received a rating of 1, accounting for a mere 2.2% of the total. Additionally, there were 448 rated 2, 534 rated 3, 157 rated 4, and 8 rated 5. This means that all ratings of 4 and 5 belong to local savings banks.
The results of this management status evaluation are interpreted as indicative of Saemaul Geumgo's failure to escape the quagmire of bad debts. Last year alone, Saemaul Geumgo sold approximately 5 trillion won in bad debts to a dedicated subsidiary, but with the real estate market not recovering, new bad debts centered around real estate project financing (PF) loans are emerging. While the sale of insolvent PF business sites is also being pursued, the uncertainty surrounding their business viability makes it unlikely for the sales to be finalized quickly. As of the end of last year, the scale of fixed delinquent loans (bad debts) for Saemaul Geumgo stood at 16.9558 trillion won, which is an increase of more than 6 trillion won compared to the end of the previous year.
In particular, the sudden removal of 'interest receivable on debt restructuring bonds,' which had been classified as interest income until the end of last year, has had a significant impact on the decline in revenue during the first half of this year. Saemaul Geumgo had reduced or deferred interest on debts that were deemed insolvent or likely to be insolvent through debt restructuring, and it assumed that it would receive the uncollected interest in the future, leading to its recognition as interest revenue in the settlement of accounts published at the end of last year. When this accounting treatment was pointed out as problematic by the Joint Audit of the Ministry of the Interior and Safety and the Financial Supervisory Service, Saemaul Geumgo plans to disclose revised financial statements that cancel all the uncollected interest previously recognized as revenue soon.