이 기사는 2020년 03월 10일 08:00 thebell 에 표출된 기사입니다.

M&A activity among South Korean savings banks is expected to increase, as financial authorities look to ease restrictions on business combinations in the sector.

The Financial Supervisory Service (FSS), the country’s financial watchdog, has recently announced that it plans to alter existing regulations for savings banks to be in tune with a changing financial environment. The plan may include relaxing restrictions on business combinations between savings banks based in different geographic areas, and lifting prohibition on ownership of three savings banks or more by the same majority shareholder.

Industry observers are expecting more concrete measures to be announced as early as next month. The authority is likely to entirely or partly lift restrictions that have limited M&A activity in the nation’s savings bank sector, they said.

“The move is meaningful in that the financial authorities finally reacted to a continuing demand for relaxing regulations,” an industry insider said. “A more detailed plan is likely to be revealed as early as next month.”

The focus is especially on the likelihood of lifting an existing restriction on combinations of savings banks with principal business offices in different areas of the country. Such a move, combined with a potential easing of a restriction on the same majority shareholder, would allow a savings bank to acquire its peers regardless of their geographical business areas, possibly accelerating M&A activity in the sector.

“OSB Savings Bank was put up for sale by a consortium of Orix Corporation and Olympus Capital last year, but the sale ended up being postponed because the sell-side couldn’t receive sufficient interest to press ahead with an auction process,” an industry insider said. “Relaxed regulations for geological business areas would provide more M&A opportunities for savings banks with plenty of capital.”

However, whether changes in regulations can lead to an increase in PE-backed transactions in the savings bank sector remains unclear, some market watchers said. That is because most PE firms favor savings banks whose business area is Seoul.

“Mergers of savings banks operating in different areas would result in cost reductions,” an industry insider said. “This could be a factor driving M&A, especially for conglomerates like J Trust Group, which owns JT Chinae Savings Bank and JT Savings bank, each operating in Seoul and the area covering Gyeonggi-do.”

“On the other hand, PE firms tend to favor savings banks operating in Seoul, rather than those based in regional areas. So, their interest in the sector will unlikely grow significantly unless those that fit their preference are put up for sale,” the industry insider added.

(By reporter Rho Ar-rum)