Opposition Imposes Conditions on Funds

The National Assembly worked late Thursday night to deal with a proposal to raise 40 trillion won ($33 billion) in public funds for financial sector restructuring.

The ruling Millennium Democratic Party and the main opposition Grand National Party tried to strike a deal at a subcommittee of the Finance and Economy Committee, where the motion to raise the funds and a special law regarding management of the money are to be dealt with in a package.

The opposition party raised a new set of conditions for voting in favor of the motion and the law, upsetting Wednesday's agreement between the two major parties.

The opposition party's new demands include establishment of a committee directly under Blue House control to manage the funds, and a provision against the government withdrawing the money without the National Assembly's consent.

The party also demanded that the Board of Audit and Inspection oversee the usage of public funds, as well as calling for a law to abolish government-directed financial systems.

It also asked that the Korea Deposit Insurance Corporation not be allowed to assist ailing banks by giving them money borrowed from healthy banks. The party said it should find another way to raise funds.

Both parties agreed to provide 7 trillion won to six ailing banks for restructuring, including 4.5 trillion won to Hanvit Bank.

The government is considering creating a holding company out of the six banks.

The holding company would become the biggest financial institution in the country in terms of asset value, projected to be 97 trillion won.

Government officials said they are also weighing the feasibility of injecting the public funds in stages, and cutting off aid to the six faltering banks if restructuring plans are not carried out to the letter.

However, analysts question whether the banks can recover from their current quagmires.

"Even the proposed holding company cannot be expected to have increased business efficiency," one analyst said.

by Park Sung-hee