[FOUNTAIN]Hope on a second marriage"We request special permission to bring in hot and dormant cash floating in Seoul to establish funds to lend to small and medium-sized businesses that are in immediate need of money."
That is the nut graph in the grand summary in "Thirty Years of Seoul Bank." Seoul Bank was founded in 1959 at the end of the Liberal Party's reign as the first regional bank to operate out of Seoul. It had a founding capital of 100 million won, which would be about $85,000 today, 14 branches and 100 employees. On the first day of business, it received savings deposits of 296 million won.
The bank was nationalized with the onset of the Third Republic in 1961, and it grew smoothly as a national bank. But in August 1976, under a government directive, Seoul Bank merged with the Korea Trust Bank, becoming the Seoul Trust Bank. The merger doubled the bank's size, and its performance peaked in 1987, when it reported total deposits of 5 trillion won.
But its glory days were short-lived. The combination of government-dictated lending and management's zeal to grow the bank eroded its stature. Companies to which Seoul Bank had extended credit went bankrupt, devastating the already embattled institution.
Other banks were suffering from the same mix of problems. However, Seoul Bank had one additional headache: internal division. Following the merger, the bank employees were clearly divided into the Seoul Bank clan and the Korea Trust Bank clan. An official from the former Seoul Bank was named the bank's president, and employees from the Korea Trust Bank were sidelined to obscure posts or demoted. An official from the former Korea Trust Bank became president, and he reinstated one of his most loyal cronies who was ousted four years before over allegations of irregularities. The internal division deepened in the 1990s. The situation deteriorated to the point where each newly appointed bank president would stress "harmony" or "chemical fusion" rather than "sound management."
The bank attempted to revamp itself with a new name in 1995, going back to Seoul Bank. But after the 1997 financial crisis, the main thing that kept the bank afloat was the 5.6 trillion won of government bailout funds. The number of employees on the bank's payroll, around 10,000 a decade ago, has shrunk to 4,000. Seoul Bank is now in merger talks. Should Hana Bank acquire Seoul Bank, a prospect that has been widely reported, it would be a different merger compared with the one 26 years ago. Should a merger happen, I hope it works this time.
The writer is a JoongAng Ilbo editorial writer.
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