DP legislator claims officials withdrew money before savings bank shutdown
The allegation that former and incumbent financial regulatory officials exploited insider information for their own means has been contentious issue amid the recent liquidity woes in the secondary banking sector.
An opposition lawmaker has claimed that several financial regulatory officials withdrew their deposits from savings banks right before the distressed secondary banking sector hit the market.
But the Financial Supervisory Service on Tuesday downplayed the allegation, claiming that most of their withdrawals were irrelevant to the savings banks operations being suspended by regulators.
A day before, Rep. Cho Young-teck of the Democratic Party made public the withdrawal of five FSS officials and two from the Financial Services Commission.
According to Cho’s report, a former senior deputy governor of the FSS, who finished his term last month, took out 20 million won ($18,018) in deposits from his account at Hyundai Swiss Savings Bank (before the secondary banking woes).
An incumbent deputy governor of the FSS withdrew his money, totaling 40 million won, from Solomon Savings Bank. Another incumbent FSS deputy governor drew out his deposits worth 24 million won from two savings banks.
The former FSS auditor, who retired last July, withdrew 76 million won and a former FSS senior deputy governor slashed his savings bank deposit to the 50 million won level which could be protected by the law.
The report also cited cases involving the incumbent secretary general of the Financial Services Commission and a former commissioner of the Securities & Futures Commission, an executive arm of the FSC.
After the FSC and the FSS suddenly halted operations of eight major savings banks during the first quarter of the year, a great number of customers protested demanding their deposits.
The suspended savings banks nationwide include Samhwa, Busan, Busan II, Jungang Busan, Daejeon, Jeonju, Domin and Bohae.
Given the situation, some market observers say, the regulatory officials’ move could invite severe criticism among the public.
But an FSS spokesman stressed that the officials were not customers of the eight halted banks.
“I believe they took out their money as the overall secondary banking industry faced difficulties,” he said. “It is apparently different from the argument that they withdrew deposits before the regulatory body took punitive action against several savings banks.”
He said the report should have been fairer and more objective if it was aimed at logically criticizing the regulatory officials’ moves.
The savings banking industry saw its troubled construction project-related financing loans come to a head in a property market slump that started during the 2008 global financial crisis sharply drove up defaults on such loans.
Since the third quarter of 2010, the FSS signed memoranda of understandings with ailing savings banks to beef up their financial soundness.
They were required in the MOUs to write off the soured loans and raise more capital to buffer against possible loan losses. But most of them failed to see a reduction in their bad PF loans, which have been blamed as the primary risk factor.
By Kim Yon-se (email@example.com