By Kang Seung-woo
The top four banking groups are busy announcing their intention to acquire troubled savings banks.
But observers question whether buying them will help their bottom lines.
“Rather than an effort to broaden customer base and diversify business portfolios, they seem to be cooperating with the government’s plan to deal with the savings bank crisis,” said a Seoul-based economist on condition of anonymity. “The financial authorities are trying to solve the problem, but other than the four major banking groups of KB Financial Group, Woori Financial Group, Shinhan Financial Group, and Hana Financial Group no one is in a position to take over debt-ridden savings lenders.
Currently, all four have declared bids for or are considering buying seven savings banks.
Woori Financial Group, the nation’s second-largest holding firm, are moving to take over one or two more savings banks after buying Samhwa Mutual Savings Bank, now Woori FG Savings Bank.
The Financial Services Commission (FSC) suspended Samhwa’s operations for six months due to inadequate capital on Jan. 14.
“Woori Financial will acquire one or two additional savings banks in order to provide services to all customer groups,” Chairman Lee Pal-seung said Monday.
“Although they can secure customers of savings banks and foray into the non-banking industry, there is not a big difference between commercial banks and savings banks in terms of business. The takeover will not be a big help to the banking groups because compared with the size of the holding firms, those of savings banks is diminutive,” the unnamed economist said. “There is no other meaning except for supporting the government’s restructuring of distressed savings banks.”
It is rumored that the financial authorities are twisting the arms of the financial holding groups to solve the savings bank problem.
FSC Chairman Kim Seok-dong has already brought a degree of discipline to major financial services companies, which are rushing to buy debt-strapped savings banks, complying with his hard-line tone on sorting out their woes.
Since his arrival as the nation’s top regulator, a total of eight savings banks have been ordered to halt their business due to liquidity shortages and he plans to put them up for sale after determining their viability.
“Nobody knows what Kim has said to heads of the financial groups, but we cannot say there is no influence on their intention to acquire savings lenders,” he said.
“There is no country where major commercial banks are marching to the government’s orders to offer microcredit to those in trouble,” Kim Sang-jo, an economics professor at Hansung University and executive director of Solidarity for Economic Reform, told The Korea Times earlier this year.
“Above all, this is not a favorable way to seek to deal with troubled savings banks in that the government is pressuring major lenders, while forcing them to rescue the troubled savings banks.”