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Regulators plan to select preferred bidders in June
The nation’s top financial watchdog decided Friday to put seven debt-saddled savings banks up for auction to find preferred bidders among bigger financial companies.
“After conducting due diligence on them and launching the bidding process in May, we plan to pick preferred bidders in June,” the Financial Services Commission said in a statement.
The seven savings banks are Busan, Busan II, Jungang Busan, Daejeon, Jeonju, Bohae and Domin. All of them were issued sanctions of six-month business suspension last February.
The FSC’s decision to sell them came at an urgent meeting of panels as they suffer serious problems in their financial status.
During the meeting, regulatory officials designated them as “insolvent financial companies” and reached a consensus that an enforced sale process is inevitable, according to the FSC.
“Though any of the seven companies could be allowed to resume their operations when they see business normalization within a certain period, the state-run Korea Deposit Insurance Corp. has no choice but to launch the sale process simultaneously,” an FSC official told a news briefing.
He said all of them saw their debts surpass assets and BIS capital adequacy ratio stay below the 1-percent level, a minimum requirement set by the regulatory body.
Potential buyers include four major financial groups, KB, Woori, Shinhan and Hana, while conglomerate-based financial units have also expressed their willingness to take over the distressed savings banks.
Should business group-based capital service firms or insurance companies participate in the coming biddings, it could be easier for regulators to find a method to dispose of the bad assets held by the secondary banking sector.
Although the seven savings banks saw their asset soundness stay at a critically weak level, the situation for buyers is favorable as the FSC has proposed a method, called purchase and assumption.
Under the P&A, unlike in an ordinary M&A, buyers are entitled to acquire only the viable assets, not all of them, on a selective basis. They are also free of the obligation to retain a large portion of the savings banks’ employees.
Acquirers are likely to hand over the remaining non-viable assets to the state-run Korea Asset Management Corp. Eventually, the government-led restructuring of the secondary banking sector could end up injecting a sizable amount of taxpayers’ money into troubled savings banks.
The financial authority is expected to inject public funds to dispose of nonviable loans via KAMCO.
Meanwhile, Samhwa Savings Bank ― another player which had suffered the business suspension ― has already been acquired by Woori Financial Group.
By Kim Yon-se (kys@heraldcorp.com)
The nation’s top financial watchdog decided Friday to put seven debt-saddled savings banks up for auction to find preferred bidders among bigger financial companies.
“After conducting due diligence on them and launching the bidding process in May, we plan to pick preferred bidders in June,” the Financial Services Commission said in a statement.
The seven savings banks are Busan, Busan II, Jungang Busan, Daejeon, Jeonju, Bohae and Domin. All of them were issued sanctions of six-month business suspension last February.
The FSC’s decision to sell them came at an urgent meeting of panels as they suffer serious problems in their financial status.
During the meeting, regulatory officials designated them as “insolvent financial companies” and reached a consensus that an enforced sale process is inevitable, according to the FSC.
“Though any of the seven companies could be allowed to resume their operations when they see business normalization within a certain period, the state-run Korea Deposit Insurance Corp. has no choice but to launch the sale process simultaneously,” an FSC official told a news briefing.
He said all of them saw their debts surpass assets and BIS capital adequacy ratio stay below the 1-percent level, a minimum requirement set by the regulatory body.
Potential buyers include four major financial groups, KB, Woori, Shinhan and Hana, while conglomerate-based financial units have also expressed their willingness to take over the distressed savings banks.
Should business group-based capital service firms or insurance companies participate in the coming biddings, it could be easier for regulators to find a method to dispose of the bad assets held by the secondary banking sector.
Although the seven savings banks saw their asset soundness stay at a critically weak level, the situation for buyers is favorable as the FSC has proposed a method, called purchase and assumption.
Under the P&A, unlike in an ordinary M&A, buyers are entitled to acquire only the viable assets, not all of them, on a selective basis. They are also free of the obligation to retain a large portion of the savings banks’ employees.
Acquirers are likely to hand over the remaining non-viable assets to the state-run Korea Asset Management Corp. Eventually, the government-led restructuring of the secondary banking sector could end up injecting a sizable amount of taxpayers’ money into troubled savings banks.
The financial authority is expected to inject public funds to dispose of nonviable loans via KAMCO.
Meanwhile, Samhwa Savings Bank ― another player which had suffered the business suspension ― has already been acquired by Woori Financial Group.
By Kim Yon-se (kys@heraldcorp.com)
