SEOUL: South Korea's parliament on Friday passed a bill to bolster savings banks hit by souring construction loans, after eight were suspended due to inadequate liquidity.
The bill revising the deposit insurance law creates a fund to support the restructuring of savings banks, which have been under pressure due to their exposure to the rocky real estate sector.
The fund, which expires at the end of 2026, will be part-financed by 45 percent of the annual deposit insurance fees collected from five different financial segments including commercial banks and insurers, the Financial Services Commission (FSC) said.
All of the insurance fees from savings banks will be directed to the new account. The government will also inject its own funds, although an FSC official said this would be a small amount.
The total size of the fund was unclear but the FSC said about 710 billion won ($631 million) in deposit insurance fees would be funnelled into it every year.
FSC chairman Kim Seok-Dong said last month that the fund would allow the authority to secure around 10 trillion.
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