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More savings banks may face shutdown: sources

More savings banks in South Korea are feared to face bankruptcies this year as continued losses wiped out their capital, industry sources said Sunday.

   According to the Financial Supervisory Service and industry sources, four out of 16 savings banks reported that their capital base was fully impaired last year and six more players suffered capital erosion last year.

   Of the ten savings banks, two players were already suspended and one is set to sell shares to boost their capital base, according to the sources.

   Should they fail to resolve their capital erosion, they will be forced to be liquidated, the source said. Capital erosion refers to a decrease in the actual worth of business equity.

   The average net loss of the 16 savings banks reached 15.8 billion won (US$14.6 million) in the second half of last year, a sharp turnaround from a profit of 260 million won a year earlier, according to the sources.

   Local savings banks suffered a massive default crisis in January 2011, when the regulatory authorities suspended some 20 savings banks due to imprudent lending practices. So far, a total of 24 savings banks have been shut down, leaving thousands of depositors unable to recover their savings.

   Since the overhaul, individuals have been turning away from putting their money in savings banks, which has made it harder for savings banks to turn a profit from either the loan business or other asset management. (Yonhap)

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