This press release was distributed by the Financial Supervisory Commission on June 29th, 1998. It contains an assessment of banks that was made by the Bank Management Evaluation Committee in order to prepare the bank restructuring plan. The Commission requested that the 12 banks that do not meet 8% of the BIS ratio by the end of December, 1997, submit a business normalization plan.
Made up of 12 specialists from the private sector, the committee evaluated key aspects of each bank including the capital adequacy ratio, capital increase plan, asset quality, risky asset reduction plan, cost reduction plan and internal management improvement strategy.
Once the results were in, the management improvement plans submitted by seven lenders including Chohung Bank, Korea Commercial bank, Hanil Bank, KEB, Peace Bank of Korea, Chungbuk Bank, and Kangwon Bank were conditionally approved. They were asked to submit more stringent business normalization action plans by the end of July, 1998.
The action plan needs to include a comprehensive management reshuffle, the attraction of external and foreign bankers and a specific capital-raising plan. Banks who are having a difficult time increasing capital should consider merging with other entities. The plan should also contain the reduction of branches, organizations and employees as well as a plan to boost profits. The Commission said that lenders who fail to implement their action plan will be forced to close down or merge with other lenders.
The business normalization plans of five banks (Donghwa Bank, Dongnam Bank, Daedong Bank, Chungcheong Bank, and Gyeonggi Bank) were not approved because they stand a slim chance of turning their operations around. They were asked to transfer their assets and liabilities to Shinhan Bank, Korea Housing Bank, Kookmin Bank, Hana Bank and Hanmi Bank, respectively. The measure is outlined in Article 14-2 of the Act on Improvement of Financial Industrial Structure.
The banks that will take over the five aforementioned vulnerable institutions were selected because they can achieve quick stabilization and maximize the synergy effects thanks to a BIS ratio of over 9% at the end of 1997, a relatively larger market share and a sizable network of branches.
Banks that will take over the five vulnerable banks were selected as they can achieve earlier stabilization and maximize synergy effects after acquisition thanks to their BIS ratios of over 9% as of end of 1997, and relatively larger market share, and branch network.
Accordingly, Kookmin and Korea Housing are merging with Daedong and Dongnam, respectively, deals that will help the banks better compete in the retail banking and small and medium business financing sectors. Shinhan Bank and Hanmi Bank will take over Donghwa Bank and Gyeonggi Bank, which have a sufficient number of branches in Seoul and its suburbs. Hana Bank will acquire Chungcheong Bank, which has the smallest number of branches.
The government will allow the weak banks that were ordered to merge to continue to handle deposit withdrawals, payments and settlements, overdraft loans and bill payments in order to reduce inconveniences caused to retail and corporate customers. To stabilize the financial market, the government announced a number of measures including the injection of liquidity into the financial market and the payment of loans on behalf of companies that had taken out loans from the banks that will no longer exist.
은행 구조조정 추진(Press release – restructuring of banks)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||금융감독위원회; 한국개발연구원 국제정책대학원|