February 23, 2011 / 12:05 AM / 7 years ago

South Korea suspends another troubled savings bank

SEOUL, Feb 23 (Reuters) - South Korea has temporarily suspended operations at another savings bank after vowing to provide liquidity and buy back bad property loans to stave off a liquidity shortage in the sector.

The Financial Services Commission (FSC) imposed a six-month suspension on debt-hit Domin Bank’s operations late on Tuesday after the bank voluntarily shut down due to a run on deposits, the regulator said in a statement.

The savings bank problem, triggered by souring property loans after the global financial crisis, has become a major issue for regulators in Asia’s No.4 economy.

Large commercial lenders are considering acquiring troubled savings banks in an effort to stem any financial shocks.

Woori Finance Holdings 053000.KS, the country’s biggest financial group by assets, was picked as a rescuer of Samhwa Mutuals Savings Bank, the first savings bank suspended. [ID:nTOE71H03H]

The country unveiled cash support measures including a 2 trillion won ($1.80 billion) credit line funded by the state-run policy financing firm and major commercial banks.

On Saturday, the financial watchdog suspended four more savings banks as the recent halt of operations of their peers sparked bank runs. [ID:nTOE71I004]

The FSC has been trying to assure customers the financial health of the rest of South Korea’s 105 savings banks is sound and has urged depositors not to withdraw too much money.

Reporting by Ju-min Park; Editing by Jonathan Hopfner

Our Standards:The Thomson Reuters Trust Principles.
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