Savings banks probe expands to corruption

By Korea Herald
  • Published : May 8, 2012 - 19:32
  • Updated : May 8, 2012 - 19:32
Mirae head suspected of embezzling W300b

State investigators on Tuesday were expanding their probe into alleged irregularities to include accounting fraud, embezzlement and illegal loans at four suspended mutual savings banks, with one of their chairmen in detention.

Kim Chan-kyung, chairman of Mirae Savings Bank, is suspected of embezzling over 300 billion won ($264 million) by issuing illegal loans and withdrawing company money as he prepared for his flight to China early this month, news reports said.
Kim Chan-kyung

Investigators believe there is a high chance most of the money was used to bribe senior government officials and politicians to avoid the suspension.

The Financial Services Commission suspended the operations of Solomon Savings Bank, Korea Savings Bank, Mirae Savings Bank and Hanju Savings Bank on Sunday as they failed to meet the capital adequacy ratios recommended by the Bank for International Settlements standards.

A team of investigators from financial regulators, the prosecution and the police on Monday arrested Kim and raided the headquarters and major branches of the four secondary lenders as well as the homes of their executives suspected of embezzlement and issuing illegal loans.

Kim is suspected of issuing some 150 billion won in illegal loans to buy a provincial golf resort under a borrowed name, embezzling 20 billion won on the pretext of building a casino hotel in the Philippines and handing over stocks owned by Mirae worth 27 billion won to a private lender in exchange for about 19 billion won in cash last month.

Investigators found that the savings banks tried to dodge suspension by issuing loans to each other to increase capital and fabricating balance sheets to cover up bad loans and raise their BIS ratios.

Solomon Savings Bank last month paid off some 3.7 billion won in loans its employees took out to buy Solomon shares.

Mirae and Solomon gave out tens of billions of won in loans to each other for capital increase.

The prosecution has banned key officials of the savings banks from leaving the country and plans to summon them for questioning as soon as it completes analyzing the materials confiscated from the raid.

By Kim So-hyun (