The Bank of Korea, the central bank, is lowering forecasts for both this year and last.
The Bank of Korea, as late as October, had predicted 0.8% growth for Q4.
South Korea, according to the Bank of Korea, faces a prolonged period of underperformance.
The two partners, Hanil Bank and Commercial Bank of Korea, are among Korea's sickest banks.
The Bank of Korea issued a warning in October that the local private-banking market needed to mature.
In Asia, the Bank of Korea met expectations by cutting its benchmark interest rate for the second time this year.
Reports the Bank of Korea bought 15 tons of gold last month is a bullish factor for gold Friday morning.
Hanvit is the result of a merger of two ailing giants, No. 3 Hanil Bank and No. 6 Commercial Bank of Korea.
We were able to source competitively-priced bank loans like our recently executed secured term loan facility with the Import-Export Bank of Korea and ABN AMRO.
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South Korea's Kospi index jumped 1.2 percent to 1, 972.70 after the Bank of Korea lowered its benchmark interest rate for the first time in seven months.
In South Korea President Lee Myung-bak has bluntly implored the Bank of Korea to go slow in returning interest rates, now 2%, to more normal levels.
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Although South Korea's Kospi Composite briefly managed to move into positive territory just before Bank of Korea's policy announcement, the index quickly slipped back, ending 0.8% lower at 1933.09.
Lee Seong-tae, the governor of the Bank of Korea, believes that the central bank, like others elsewhere, will have to be increasingly alert to the risk of speculative bubbles.
The Bank of Korea's surprise rate cut decision on Thursday indicates that South Korea, whose net exports represent nearly 60% of its gross domestic product, has joined the global currency war.
The strength of the dollar was also felt in South Korea, where it hit a five month high against the won after the Bank of Korea decided to keep interest rates steady.
Analysts also cited continued central-bank buying of gold after news that the Bank of Korea bought 25 metric tons over the past two months, its first purchases since the 1997-98 Asian financial crisis.
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In general the bigger the institution, the more likely there is to be support, especially when the government has a direct stake (as in the Bank of Taiwan and the Industrial Bank of Korea).
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In South Korea the Kospi fell 2.2% to 1785.39, its lowest close since early June, after the Bank of Korea unexpectedly cut its benchmark interest rate by a quarter of a percentage point to 3%.
Analysts also said gold is underpinned by ongoing European debt issues, a continuation of central-bank buying after Bank of Korea purchases, plus still-soft U.S. economic data that means continued loose monetary policy and perhaps even more stimulus.
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Along with five others, they had been forced to draw up restructuring plans after falling short of the 8% ratio of capital to risk-weighted assets that is considered the acceptable minimum by international financial regulators (by more than six percentage points in the case of Commercial Bank of Korea).
The state-run Bank of China Ltd. has notified the Foreign Trade Bank of North Korea that its account or accounts were being closed and all financial transactions suspended, said a bank spokeswoman, reading a brief statement.
"Bank of China has sent North Korea's Foreign Trade Bank a notice that it has closed its account and has also halted all fund transfers related to this account, " Bank of China said on Tuesday.
As The Economist went to press that was the choice facing HSBC, whose dogged pursuit of Korea Exchange Bank (KEB) has become a litmus test of South Korean attitudes to foreign investment.
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In response to overseas media reports that the Bank of China has closed the account of North Korea's main foreign exchange bank, Shi Yinhong, an international affairs expert at Beijing's Renmin University tells Hong Kong's South China Morning Post that Beijing is losing patience with Pyongyang.
Shinhan Bank, a lender of South Korea's fourth-largest banking group, reported a system shutdown, including online banking and automated teller machines.
They are already on the line for last month's rescue of Korea First Bank, and face additional bills as other banking companies need emergency help.
The US Treasury added the Foreign Trade Bank (FTB) of North Korea and Paek Se-bong, the chairman of a committee which it said oversaw production of ballistic missiles, to the sanctions list.
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