By Yoon Ja-young
Staff Reporter
Savings banks are seeing their financial structure deteriorate due to the withering project-financing market. As a result a number of provincial small savings banks have been put up for sale.
According to statistics by savings banks, six among approximately 110 nationwide had Bank for International Settlements (BIS) capital adequacy ratios below 5 percent, a barometer of the lender's financial health.
Bundang Savings Bank, which had its ratio fall to minus 16.96 percent at the end of 2007, has had its operations suspended for six months. Savings banks in Busan and other provinces had their ratios fall below 5 percent as of the end of last year. The number of savings banks with deficits in the latter half of last year totaled seven.
Savings banks have been suffering from decreasing household loans following strict regulations on these by the former government. Bank deposits have also seen sluggish growth due to the equity fund boom.
The bigger risk comes from real estate development financing by savings banks. They have made loans for real estate development projects, such as the building of apartments or shopping centers, in which the debt is paid back from the profit generated by the project.
It helped facilitate real estate development, but due to a sluggish real estate market, a growing number of development projects have ground to a halt, driving lenders and builders into difficulties. Savings banks' loans on project financing are estimated to total 13 trillion won as of December last year, 25.7 percent of total loans. The delinquency ratio, which stood at 13 percent as of June last year, is estimated to reach 20 percent in June this year.
Following the rapid cool down of the project financing market, a number of savings banks, including Bundang Savings Bank, one in North Jeolla Province and another in North Gyeongsang Province, have been put up for sale.
According to the Ministry of Land, Transport and Maritime Affairs, 314 builders, mostly based outside of Seoul, went bankrupt last year. One third of them went bankrupt in the fourth quarter.
``Project financing asset-backed securities reaching maturity have dramatically surged since the end of the last year. Bankruptcy among builders seem inevitable unless the paying back of loans is delayed,'' the Construction and Economy Research Institute of Korea reported.
chizpizza@koreatimes.co.kr
