South Korea's financial regulator is expected to suspend two to three more debt-ridden savings banks in the third quarter as part of efforts to revamp the sector struggling to clear bad property loans, officials said Sunday.
As part of the efforts, the Financial Supervisory Service (FSS) and Korea Deposit Insurance Corp. (KDIC) will launch thorough inspections into about 15 savings banks with feeble financial health or heavier holdings of construction project financing loans, they said.
Of the total firms subject to the examination, up to three savings banks are likely to face business suspension during the third quarter, they added.
"We are keeping a close eye on several savings banks as their lending to property projects rose sharply in the past two to three years and their business performance came under skepticism," an FSS official said.
The regulator, however, plans to come up with measures to prevent a potential bank run before pushing ahead with the restructuring plan in the second half of 2011, the FSS noted.
The latest moves to weed out unviable savings banks came after the Financial Services Commission, or the decision-making body of the FSS, halted business of eight capital-lacking savings banks in January and February.
Amid a prolonged housing market slump, massive defaults by builders and property developers resulted in a pileup of distressed loans at savings banks, impairing their ability to meet deposit withdrawal demands.
Meanwhile, major banking groups are showing interest in taking over the suspended savings banks put up for sale.
Top financial group KB Financial Group Inc., Shinhan Financial Group Co. and Hana Financial Group Inc. are reportedly seeking to buy the seven savings banks that the deposit insurance agency put up for sale. Woori Finance Holdings Co., the second-largest financial group, bought one of the suspended savings banks in March.
Shinhan Financial said it decided to bid for a package of two to three savings banks and KB Financial also plans to join the race, the groups said.
"Hana Financial is interested in submitting a letter of intent to buy," its official said.
After accepting letters of intent by Monday, the KDIC plans to find owners for the savings banks by August through launching an auction during June and July to sell them in several packages or separately.