Seoul: South Korea's financial regulator has announced a series of measures aimed at enhancing the competitiveness of savings banks. The initiatives include easing regulations surrounding mergers and acquisitions (M and As) and implementing more flexible loan classification rules.
According to Yonhap News Agency, the Financial Services Commission (FSC) plans to establish a fund exceeding 1 trillion won (approximately US$689 million) to assist savings banks in removing soured loans from their balance sheets. Additionally, a special vehicle will be launched to manage non-performing loans extended by these banks.
The FSC has also indicated that it will relax rules on M and As within the sector and reassess the stringent loan classification rules that savings banks currently face. These measures are intended to accommodate the unique business environment of savings banks.
Data reveals that the assets of savings banks have been on a steady rise, reaching 120.9 trillion won at the end of the previous year, a significant increase from 92 trillion won in 2020 and 86.9 trillion won in 2010. Despite this growth, their lending practices are heavily concentrated in real estate development projects and low-rated, financially weak clients. This focus makes them susceptible to economic fluctuations, which has led to declining profitability and deteriorating financial conditions.
In line with the increase in soured loans related to real estate project financing, savings banks experienced a loss of 397 billion won in 2024, following a 575 billion won loss the previous year. However, in 2022, they achieved a combined net profit of 1.56 trillion won.