Following measure of 7 saving banks

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Following-up measures of 7 savings banks

With a check of management efficiency, FSC decided to put cease and desist order to 7 mutual savings banks which are Jeil, Jeil2, Prime, Daeyeong, Ace, Parangsae, and Tomato.

The reasons are, first, except for Jeil2, 6 mutual savings banks’ BIS capital adequacy ratio are below criteria which is less than 1% and their debt is bigger than asset.

Regarding of Jeil2 mutual savings bank, BIS capital adequacy ratio is less than 1%, and liquidity deficit is definitely expected because its’ parent company, Jeil mutual savings bank, had a bank run due to suspension of business.

Main financial status of 7 mutual savings banks that has been ordered to suspend business

classification

Jaeil

Jaeil2

Prime

Daeyeong

Ace

Parangsae

Tomato

Total asset

33,137

10,610

12,566

6,176

9,918

4,182

38,835

Total loan

30,470

7,590

9.061

4,013

13,275

3,778

33,614

Total reception

30,553

9,853

11,328

5,909

12,796

4,142

39,776

BIS ratio

△8.81

△0.63

△4.14

△9.13

△51.10

△5.50

△11.47

Net asset

△2,070

118

△489

△303

△3,787

△300

△4,419

(Unit: one hundred million, %)

Main contents of cease and desist order are as follows.

  1. From 11.9.18 to 12.3.17, suspension of business for 6 months(except for some tasks which are pertained to matured bill)
  2. Performance of executives’ duties is suspended and designation of administrator (except for Jeil2).
  3. Achieve BIS adequacy ratio more than 5% by issuing new stocks within 45 days.

FSC notified that there would be capital supports in normal mutual savings banks.

(Applicants): savings banks that are expected to continue their business with more than 5% of BIS capital adequacy ratio and that pass the deliberation by Korea Financial Corporation.

    Applicants of TSF

  1. BIS ratio should be ranged from 5% to 10%.
  2. Should not be supported by government or Korea Deposit Insurance Corporation.
  3. Should not be ordered which are relevant to prompt corrective action.
  4. Should not be large-scale enterprises or savings banks that are under the financial holding company

    Criteria of considerations: credit rating of company, optimality of capital, profitability, etc.

(Apply principles): support enough capital to savings banks to achieve 10% of BIS capital adequacy ratio.

Pushing ahead with financial problem in local residents and mid-sized companies.

1. Measures of support ordinary people

□ Focusing on 3 financial products for low-income house-hold in relevant local areas to solve the difficulty problem of financing so that people in low-income class do not have to be suffered.

  1. Micro-Credit: largely expand the limit of support in local area.
  2. Sunshine Loan: lead ordinary people-financial companies to expand handling Sunshine Loan
  3. Seed of Hope Loan: let banks first support relevant local areas and then, manage the results of loan by FSS.

 

2. Measures of support local mid-sized companies.

□   Extend the period of trust guarantee funds and Korea technology credit guarantee.

*Regardless of total amount of Korea technology credit guarantee, support would be given up to one hundred million-won.

□   Expand loan for stabilizing business of bank of mid-sized company.

*Additional aid up to 3 hundred million-won per one company, give right to reduce interest rate for manager and plus right of 1%p more exemption.

□   Absorb demand of capital which belongs to loan traders using suspended savings banks by local banks.

□   If needed, expand the support of on-lending of KoFC to relevant local banks.

*Due to measure in February, this year, limit of on-lending for local banks increased from 1.4 trillion won to 2.4 trillion won.

Ju Hyun Han (blackhall4@naver.com)

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