The Financial Supervisory Service will begin on-site inspections of approximately 10 savings banks, starting with OK Savings Bank. The target banks have been failing to properly manage their soundness, including arrears, while postponing the restructuring of troubled business sites during the process of pursuing the normalization of real estate project financing (PF).
According to financial authorities and the savings bank industry on the 18th, the FSS will commence an on-site inspection of OK Savings Bank, the second-largest bank by asset size, this week. The financial authorities plan to select about 10 more banks for on-site inspections through the second half of this year. It seems the FSS has taken direct action after primarily managing the soundness of savings banks through on-site checks and joint inspections with the Korea Deposit Insurance Corporation.
In particular, considering the asset size of OK Savings Bank, which exceeds 13 trillion won, a large inspection team will be deployed. It is reported that there will be 2 to 3 times the usual inspection personnel size for savings banks (6-7 individuals) assigned to the site. The FSS plans to oversee overall soundness and risk management, including the restructuring of troubled assets and the accumulation of provisions, through this inspection.
Since June last year, the FSS has changed the evaluation criteria for the feasibility of PF and has been encouraging the prompt restructuring of troubled business sites. However, some savings banks are experiencing delays in restructuring, resulting in continued arrears. In the case of OK Savings Bank, the arrears rate recorded 9.05% as of the end of last year, which is higher than the industry average of 8.52%.
This is higher compared to the other five major banks, such as SBI Savings Bank (4.97%), Welcoming Savings Bank (7.50%), Accuon Savings Bank (5.36%), and Korea Investment Savings Bank (8.13%). Financial authorities are reportedly concerned about OK Savings Bank's passive approach to restructuring troubled assets while actively seeking to expand its size through mergers and acquisitions (M&A).