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Photo courtesy of the FSC |
[Alpha Biz= Paul Lee] South Korea’s financial authorities have imposed a Level 2 Prompt Corrective Action (PCA) — a management improvement requirement — on SangSangin Plus Savings Bank, citing deteriorating asset quality. The bank, however, pushed back, claiming its financial condition has recently improved.
The Financial Services Commission (FSC) announced on June 25 that it had discussed prompt corrective measures for savings banks at its regular meeting. As a result, SangSangin Plus was ordered to implement a management improvement plan, while Union Savings Bank, which showed signs of asset quality recovery, was granted a deferral.
Prompt corrective actions consist of three levels: management improvement recommendation, requirement, and order. The FSC decided that SangSangin Plus needed further efforts to improve its financial soundness, based on the bank's financial condition and review of its submitted recovery plan.
SangSangin Plus was previously rated “Grade 4” in a management evaluation by the Financial Supervisory Service (FSS), primarily due to its exposure to risky real estate project financing (PF) loans.
The management improvement requirement mandates actions such as disposal of non-performing assets, capital increase, cost reductions, restrictions on dividends, and limitations on high-risk asset holdings. Importantly, the measure does not include a business suspension, meaning SangSangin Plus can continue operating normally during the implementation period.
If financial conditions improve sufficiently during this time, the FSC may lift the order. In March, the FSC had issued the lowest-level PCA — a management improvement recommendation — to SangSangin Savings Bank, while granting deferrals to Pepper, Woori, and Solbrain Savings Banks.
In Q1 2024, SangSangin Plus’s ratio of substandard and below loans rose to 24.74%, up 1.15 percentage points from a year earlier. Its BIS capital adequacy ratio fell to 8.64%, just above the regulatory minimum of 8%. The bank recorded a net loss of KRW 8.3 billion in Q1, an improvement from a KRW 17.3 billion loss a year prior.
Still, the bank criticized the PCA as excessive, stating that it had returned to profitability since April and is on track to meet regulatory requirements by September. It also highlighted its participation in the upcoming fourth batch sale of distressed PF loans coordinated by the Korea Federation of Savings Banks.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
