Behind savings bank fiasco
By Kim Jae-kyoung BusinessFocus editor Over the past month, domestic savings banks have made the headlines of local dailies almost every day after the Financial Services Commission (FSC) has suspended eight such institutions due to poor liquidity and snowballing losses. The trouble was seemingly the result of unmanaged asset/liability gaps that led to massive losses from investing in so-called project financing (PF), a new lending scheme designed to support the construction business. With the financial regulator failing to fix the mess properly, the story of how the debacle happened continues to haunt the local financial industry and is now turning into a blame game. On the surface, the fiasco was the outcome of the deadly cocktail of savings banks’ reckless lending to builders mixed with an unfavorable real estate market. The property market has stayed in the doldrums since the latter half of 2008. However, the government should take some responsibility for its inappropriate regulation. Top regulators just sat back and waited for the property market to rebound. Eve
