Savings banks seek major overhaul

A logo of Korea Federation of Savings Banks

By Lee Kyung-min

Savings banks in Korea have set up a joint taskforce to carry out organizational reform and facilitate a long-term image makeover, an industry official said Tuesday.

The move seeks to remove negative notions long associated with the lower-profile banks and find new and sustainable sources of revenue amid fast-declining profitability compounded by the prolonged economic slowdown.

The Korea Federation of Savings Banks (KFSB), which represents 79 savings banks nationwide, said the taskforce will work to find ways to better implement regulatory guidelines and overcome business challenges.

Working-level officials from 11 banks will meet regularly to discuss pressing issues and subsequent measures drawn up reflecting the needs of banks regardless of their locations.

“We face hundreds of regulatory challenges,” a KFSB official said.

“Whether we have to seek greater cooperation with fintechs will be determined later."

A review is underway by a group of academic financial experts to pinpoint the most pressing issues and set priorities in coming up with resolutions.

“The study will be made public in October and specifics will be outlined accordingly based on priorities determined,” a KFSB official said.

The study is part of numerous efforts by the KFSB to diversify its business portfolio amid bleaker-than-expected growth prospects.

A group of mid-tier savings banks are seeking to introduce a new financial product that uses Artificial Intelligence (AI) in assessing credit and leverage viability following the appraisal of property values.

Similar moves are expected in the coming months given much-strengthened government regulations.

Financial Services Commission (FSC) guidelines dictate that the banks must increase their loan loss reserves to improve crisis management in the event of a possible customer default.

The commission has also imposed stricter lending rules to curb speculative forces in the long-overheated housing market.

These challenges pose greater risk to the banks' profitability, felt severely in areas not as popular or commercially vibrant areas as Seoul, Gyeonggi Province and certain metropolitan cities.