Top regulatory officials on Wednesday stepped up to placate investors amid growing worries over a possible default of the financially distressed Tong Yang Group.
The officials’ direct comments on the conglomerate came after a large number of stock investors pulled deposits worth several trillion won from their Tong Yang Securities accounts this week.
“Customers’ assets at Tong Yang Group’s financial units including Tong Yang Securities remain safe,” Financial Supervisory Service Gov. Choi Soo-hyun told a news briefing on the day.
“Further, investors closing their investment contacts on fund products (offered by Tong Yang Securities) before due dates could suffer losses,” he said.
|The headquarters of Tong Yang Securities in Seoul. (Park Hae-mook/The Korea Herald)|
In line with his remarks, some customers are suffering losses as they withdraw money despite losses in earnings or paying service charges for breaking the contracts.
Choi said the FSS is striving to eliminate possibly negative factors by closely monitoring the soundness of the group’s financial units, adding that it has dispatched a group of inspectors to the companies.
Earlier in the day, Financial Services Commission chairman Shin Je-yoon stressed that the maturing commercial paper worth about 1 trillion won ($909 million) is not held by Tong Yang Securities but by Tong Yang Group’s nonfinancial units.
“There is no reason for customers of Tong Yang Securities to feel uneasy,” Shin told reporters.
Meanwhile, the FSS said its inspectors are probing Tong Yang Financial Services, a money-lending subsidiary of Tong Yang Securities.
According to FSS data, Tong Yang Financial Services has so far issued 45.7 billion won worth of commercial paper. About 16,000 retail investors hold Tong Yang Group’s CPs worth a total of 456.3 billion won, with some 31,000 others having invested in 1 trillion won worth of corporate bonds sold by the conglomerate.
While the group is reportedly considering auctioning off some of its business units, a noteworthy issue is whether financial authorities would ultimately instruct state-controlled banks and major commercial banks to bail out the cash-strapped conglomerate.
Officials at the state-run Korea Development Bank said they are closely monitoring the situation.
Tong Yang’s sister conglomerate, Orion Group, recently clarified that it had no plans to rescue the debt-saddled group.
However, Seonam Foundation chairwoman Lee Gwan-hee, widow of the late Tong Yang founder Lee Yang-gu, said she would provide the strained group with 159,000 Orion Group shares worth 150 billion won as a type of bailout fund.
By Kim Yon-se (firstname.lastname@example.org