Savings banks fall like dominos
Almost a year ago, authorities suspended the operations of Samhwa Mutual Savings — basically closing it for insolvency — and that touched off the shutting of 15 more savings banks over the succeeding months, separating depositors from any of their savings above the 50 million won ($43,400) amount guaranteed by the government. Shareholders and investors in bonds of the banks were also hit. Included were the nation’s largest savings bank group, the Busan Savings Bank group, and other industry leaders like Tomato and Jeil savings banks.Most of the banks were victims of their own recklessness in investing in project financing loans that soured in a lackluster real estate market. But the suspensions also revealed a dizzying amount of illegal shenanigans by the banks’ managements. They lent way beyond the limit set by authorities, used the banks’ deposits as their personal piggy banks, outrageously cooked the books, lied about their liabilities and brazenly bribed a constellation of government officials, especially at the end to keep from being suspended. Ten of the 16 suspended banks have been sold or will be soon.
with the Korea JoongAng Daily
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