Two finance bills meet different fates

Two controversial financial bills met different fates yesterday after one was stalled in committee while the other was passed to go for a main parliamentary vote.

With critics charging that the bills play to voters in advance of elections, flout fairness, the rule of law and are possibly unconstitutional, the bills are expected to deepen the debate over populist vote-grubbing and promises of government interference in the economy.

Out of 108 proposed bills or law revisions that came up before the National Assembly’s Legislation and Judiciary Committee yesterday, the financial industry’s eyes were fixed on just two.

One, provisionally called the “Act on Special Measures for Relief of Nonperforming Savings Banks’ Victims,” is a bill that seeks to compensate customers who had more than 50 million won ($44,300) deposited in savings banks suspended after September 2008 for 55 percent of their losses. A lower level of compensation would be given to subordinated bond holders of the banks, all coming from the nation’s deposit insurance fund.

A vote on the bill from the Legislation and Judiciary Committee was postponed yesterday to April, suggesting the impetus behind the bill was losing steam.

According to the Financial Supervisory Service, there are 63,100 customers from 18 suspended savings banks - who had deposits above the insured amount of 50 million won - and subordinated bond holders.

Under the bill, these people stand to receive an estimated 102.5 billion won, initially from the deposit insurance fund. Lawmakers have also suggested that the compensation come from next year’s government budget.

The bill has incited controversy since its passage through the National Assembly’s National Policy Committee on Feb. 9. It has been criticized by President Lee Myung-bak, heads of both the FSS and regulatory policy maker Financial Services Commission, all five associations of financial companies, and conservative civic groups.

“The law might undermine the very foundations of the deposit insurance system,” said FSC Chairman Kim Seok-dong at a hearing yesterday. “Similar legislation will be submitted every time there is restructuring [of the financial sector], making it difficult to maintain order in the financial market.”

Critics say the law is geared to win votes in Busan, as an estimated 65 percent of compensation will be going to customers and investors in the Busan and Busan II savings banks.

However, proponents were adamant. “Asking 72,000 elderly, undereducated and poor saving banks victims to go through lawsuits and wait four to five years [for compensation] would be like driving them to their deaths,” said Huh Tae-yeol, a lawmaker from Busan’s Buk and Gangseo B districts.

Meanwhile, a proposed revision of the Specialized Credit Financial Business Act that would give the FSC, instead of the free market, the power to determine credit card transaction fees for small businesses, was passed on for a main parliamentary vote yesterday. Credit card companies say they may take it to court.

By Lee Jung-yoon [joyce@joongang.co.kr]