By John Galt
July 4, 2011
The news from Asia tonight continues to indicate that there is a little Greece in everyone. Beyond the warts due to the local debt issues the ChiComs are starting to show, it would appear that the Financial Services Commission of Korea did not use the Goldman Sachs-Turbo Timmy stress test model and actually conducted serious exams and audits of the savings banks in that nation. From Monday’s Korea Times:
More savings banks to be suspended
Stress test begins to ferret out bad apples from good ones
By Kim Tae-gyu
“Several” more savings banks are expected to face suspensions, an official of the Financial Services Commission (FSC) told The Korea Times Monday, as the regulator began its stress test on the troubled secondary banking industry.
“The chances are that business of several savings banks will be suspended in consideration of current situations,’’ said the FSC official who asked not to be named.
Although the insider’s prediction comes even before the inspection is getting into full swing, it is being given credence because the FSC has been closely monitoring the troubled industry for quite some time and in consideration of FSC Chairman Kim Seok-dong’s “get-the-job-done” personality. Kim, however, has received bruises on his reputation for a series of half-baked measures about the Lone Star case and the Woori Financial Group sale.
The FSC has formed 20 special teams comprising 340-plus specialists to delve into financial health of 85 savings banks over the next two months.
The inspection is spreading fears to quite a few of the mini lenders.
Eight out of the overall 105 experienced got their operations suspended this year. One of the eight was taken over and is brought back to operation.
“Among 98 savings banks in operation, we will look into financial soundness of 85 players excluding 13, which either have already gone through inspections this year or are owned by state-run entities,’’ FSC Chairman Kim said. “The Bank for International Settlements (BIS) ratio would be the benchmark. Those whose BIS ratio is less than 1 percent with excessive obligations might see their operations halted.’’
I wonder how many U.S. banks would survive such a rigorous inspection. Then again, who cares as long as the dollar is the world’s reserve currency, we can just make it up as we go along doing and saying whatever we want. Isn’t that right Ben?