Financial Authorities Recommend Management Improvement to Anguk and Raon Savings Banks... Normal Operations Possible (Update)

6-Month Period for Implementation of Measures

The Financial Services Commission announced on the 24th that it has imposed the lowest level of corrective action, a management improvement recommendation, on Anguk Savings Bank and Raon Savings Bank.

On the same day, the Financial Services Commission held its 22nd regular meeting and resolved to impose management improvement recommendations on Raon Savings Bank and Anguk Savings Bank. This measure is a proactive step to strengthen asset soundness management for savings banks whose soundness indicators temporarily deteriorated during the normalization process of real estate project financing (PF). As of the end of September, the BIS ratios of Anguk Savings Bank and Raon Savings Bank were 13.2% and 10.9%, respectively, exceeding the regulatory ratio of 7%. However, their delinquency rates were 19.4% and 15.8%, significantly higher than the industry average of 8.7%. The ratio of non-performing loans (NPLs) was also high at 24.8% and 16.3%, compared to the industry average of 11.2%. S&T Savings Bank was excluded from this measure as its asset soundness indicators have already improved and it holds sufficient capital capacity (BIS ratio of 21.5% as of the end of September).

The Financial Services Commission explained that this management improvement recommendation advises the disposal of non-performing assets, capital increase, and restrictions on dividend payments, but does not include any operational restrictions. Accordingly, during the six-month implementation period, the affected savings banks can continue normal operations, and deposit and loan services will be available as usual.

In particular, the financial authorities emphasized regarding depositor protection that "Savings banks are guaranteed to pay up to KRW 50 million per depositor per savings bank, including principal and a certain amount of interest, under the Depositor Protection Act," and warned that "unnecessary early withdrawal of deposits may cause contractual interest losses, so caution is needed."

The financial authorities explained, "Since the second half of 2022, we have consistently promoted an orderly soft landing of real estate PF, and currently, the soft landing of real estate PF is proceeding within a predictable and manageable range." They also forecast, "The savings bank sector is strengthening soundness management through the disposal of non-performing loans within the framework of the real estate PF soft landing, and the overall soundness and profitability of the savings bank sector are expected to improve in the future."

Looking at the overall indicators of the savings bank sector, the BIS ratio has significantly improved from 6.84% at the end of 2011 to 15.18% at the end of September 2024, and the delinquency rate has decreased from 20.3% to 8.73% over the same period. The ratio of non-performing loans also showed a substantial improvement from 25.6% to 11.2% during the same period.

A financial authority official stated, "Due to improvements in soundness and governance systems, the loss absorption capacity, asset soundness level, and crisis response capability of the savings bank sector are qualitatively different from those during past savings bank crises," and added, "We will continue to maintain a strict soundness management system for savings banks based on principles and procedures to proactively prevent the occurrence of insolvency and to guide savings banks to secure competitiveness."

This content was produced with the assistance of AI translation services.