FSS urges local savings banks to implement stringent risk management

Financial Supervisory Service (FSS) Governor Jeong Eun-bo speaks during a meeting with local savings bank CEOs at Hotel President in central Seoul, Tuesday. Courtesy of FSS

By Anna J. Park

During a meeting with local savings bank chiefs, Financial Supervisory Service (FSS) Governor Jeong Eun-bo stressed the need for meticulous risk management on the part of savings banks during this time of continuing uncertainty in the global economy.

The FSS chief urged domestic savings banks to take stringent voluntary supervisory approaches in order not to repeat any previous unfortunate incidents such as the mass run for bank withdrawals that took place in 2011, when approximately 100,000 customers suffered damages as dozens of savings banks were closed down. More than 27 trillion won ($23 billion) of public money was caught up in the situation, yet less than half of this money, or 13.4 trillion won, has been retrieved, after 10 years.

“Recently, the internal and external economic situations are as uncertain as ever, due to concerns over recovery and sluggish growth. Accumulated household debts also remain a potential risk factor that could accompany a radical correction in asset prices, amid increasing interest rates. Following the global financial crisis, the fall of asset prices led to the 2011 bank run on local savings banks,” FSS chief said during the meeting. “That 'bank run' became a big burden to the economy, resulting in colossal damages to depositors, and the public money injected into it still hasn't been fully recovered.” Jeong continued.

“Insolvency on the part of savings banks should never again be transferred as risks to the entire financial system,” FSS chief stressed.

Financial Supervisory Service (FSS) Governor Jeong Eun-bo, third from left desk, speaks during a meeting with local savings bank CEOs at Hotel President in central Seoul, Tuesday. Yonhap

The remarks by the country's top financial policy regulator are aimed at reminding the country's leading savings banks to take detailed measures to maintain their soundness. The FSS chief also said that it will introduce a differentiated supervisory system that will fit each bank's asset size, considering the highly differentiated asset sizes among savings banks.

At the same time, the governor reiterated his repeated commitment to improving regulations that prohibit savings banks' participation in loan consortiums, so that the banks can provide further liquidity to local businesses.

The attendees of Wednesday's meeting included six leaders of local savings banks: Hana Savings Bank CEO Oh Hwa-kyung, Incheon Savings Bank CEO Park Chan-jong, Jinju Savings Bank CEO Park Ki-kwon, Star Savings Bank CEO Yang Soon-jong, SBI Savings Bank CEO Lim Jin-gu and Kiwoom Savings Bank CEO Huh Heung-beom. National savings bank association chairman Park Jae-sik was also present at the meeting.