Savings bank bill causing rift ahead of elections

Lawmakers have moved to enact a special law to reimburse victims of the nation’s troubled savings banks for their lost deposits, prompting critics to accuse them of bending the rules and wasting taxpayers’ money to woo voters ahead of April’s parliamentary elections.

The criticism comes as the bill on Thursday moved one step closer to approval as the parliamentary committee on national policy passed it through the Legislation and Judiciary Committee. It needs to be put to a vote for full approval by the National Assembly in a plenary session later this month.

The special bill calls for the government to use a deposit protection fund to reimburse individual customers and bond investors of the nation’s suspended savings banks for losses over 50 million won ($44,700). The current law only guarantees deposits up to 50 million won.

If passed, over 82,000 bank account holders and bond investors who were not compensated by the failed savings banks are expected to get their money back from the government. The total amount is estimated at about 102.5 billion won.

Since the 2008 financial crisis, the nation’s regulator has suspended the operations of 18 savings banks due to weak financial standing. Among them was Busan Savings Bank, formerly the nation’s largest savings bank, which was at the center of a massive influence-peddling scandal involving bank officials, state auditors and politicians.

The government and financial experts have expressed concern that making a special law to compensate a particular group of deposit holders and investors could unsettle market order.

“The bill interferes with the deposit protection system, which should be fair to everybody,” said an official at the Financial Supervisory Commission. “There is also a possibility that the bill could infringe on the property rights of a number of members of the general public” for using the deposit protection fund.

Some market watchers saw the bill as a populist move to woo voters ahead of the elections in April. “What lies beneath the special bill is populism,” said a senior financial official.

“It is regrettable that [politicians] are trying to hamper market principles and trust.” Yonhap