No sane person would deposit a large sum of money with a financial institution if he had no conviction that he would be able to withdraw the deposit at maturity. This depositor trust was betrayed when the Financial Services Commission suspended operations at Busan Savings Bank on Feb. 17.
Worse still, what had reportedly happened at the savings bank before it was ordered to suspend operations calls into question its status as a government-licensed financial institution. What was left of the bond of trust was shattered when it was reported this week that its officials had breached the law and used insider information in favor of their families, relatives and privileged patrons.
In an emergency consultation with large shareholders of the savings bank on the evening of Feb. 16, the financial regulators made a final decision to order a suspension. This and other confidential information was undoubtedly leaked to officials of the savings bank.
On off-business hours on the eve of suspension, the savings bank was accused of alerting its 30-odd VIP clients, each with 100 million won or more in deposits, to withdraw their money. On the previous day, its executives and employees allegedly advised their relatives to withdraw their deposits, apparently based on insider information.
One estimate puts at 35 billion won the amount of money withdrawn in this manner. What were officials from the Financial Services Commission and Korea Deposit Insurance Corp., who had been stationed at the troubled savings bank, doing when money was illegally withdrawn?
The 300,000 depositors are yet to be allowed to withdraw money from the savings bank. Among them are 10,000 people whose deposits exceed 50 million won each, the maximum amount covered by deposit insurance.
Busan Savings Bank may not be the only troubled savings bank that engaged in the illegal practices. A more extensive inquiry is called for.