Financial Services Commission Recommends Management Improvement for Sangsangin Savings Bank... Pepper, Woori, and Solbrain Granted Grace Period

Mandatory Intensive Restructuring for the Next Six Months
Including Disposal of Non-Performing Assets

Sangsangin Savings Bank, entering the 'Top 10' for the first time in 12 years since the savings bank crisis, has received a Prompt Corrective Action (PCA) recommendation (management improvement recommendation, demand, order). Over the next six months, Sangsangin Savings Bank must undergo intensive restructuring, including disposal of non-performing assets, changes in capital, and expense reduction. Pepper, Woori, and Solbrain Savings Banks have been granted a deferral of the management improvement recommendation.

On the 19th, the Financial Services Commission held a regular meeting and resolved to issue a management improvement recommendation, corresponding to the first stage of Prompt Corrective Action, to Sangsangin Savings Bank. Prompt Corrective Action is a compulsory measure imposed by financial authorities on insolvent financial companies.

Savings banks receiving the recommendation must implement measures such as disposal of non-performing loans, capital increase, and dividend restrictions.

When a savings bank ranked within the top 10 in assets, like Sangsangin, receives Prompt Corrective Action, it is the first time in 12 years and 10 months since the suspension of operations of Solomon, Mirae, Korea, and Hanju Savings Banks on May 6, 2012.

Sangsangin Savings Bank received Prompt Corrective Action because its asset soundness significantly deteriorated. As of the end of the third quarter last year, the bank's non-performing loan ratio was 26.71%. Non-performing loans refer to loans overdue for more than three months in principal or interest payments or loans expected to be unrecoverable in the future.

As financial authorities impose Prompt Corrective Action on large metropolitan savings banks, tension is rising across the industry. Sangsangin Savings Bank's assets amount to 2.7554 trillion KRW, ranking 10th in the industry. The number of customers reaches 148,342.

Even if Prompt Corrective Action is imposed, the savings bank's operations will continue normally. Authorities expect the impact of this measure on the financial market and others to be extremely limited.

Within the industry, it is anticipated that even with the recommendation imposed on Sangsangin, it will not lead to a large-scale deposit withdrawal crisis (bank run). This is because the deposit insurance limit is scheduled to increase to 100 million KRW this year, and many customers are medium- to low-credit individuals with deposits below the current limit of 50 million KRW, so funds are not expected to drain rapidly in the short term.

However, if Sangsangin Savings Bank does not receive a deferral, its bargaining power in the merger and acquisition (M&A) deal with OK Financial Group may weaken. Since OK Financial Group is recently exploring the M&A of Pepper Savings Bank, this creates a variable that Sangsangin Savings Bank must manage to prevent a decline in negotiation power. However, OK Savings Bank stated, "Even if Sangsangin Savings Bank receives Prompt Corrective Action, it will not be a significant variable in the price negotiation process."

Pepper, Woori, and Solbrain Savings Banks, which were included in the candidates for Prompt Corrective Action, were granted a deferral of the management improvement recommendation. The Financial Services Commission judged that asset soundness indicators improved through the auction and sale of non-performing business sites and non-performing loans.

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