The Korea Herald

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1.5 trillion won flees from savings banks

By (공용)코리아헤럴드

Published : May 6, 2011 - 20:00

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The total amount of deposits at local savings banks plunged by 1.5 trillion won ($1.4 billion) during the past four months due to concerns over their security, according to a report released by the Korea Deposit Insurance Corp. on Friday.

The tota of deposits held at 96 savings banks nationwide stood at 64.8 trillion won at the end of April, according to the staterun deposit insurer. The figure
excludes 10.4 trillion which was received at eight of such institutions whose operation was suspended during the period.

The drop in the size of deposit, which accounts for 2.2 percent of the total, came mostly from customer withdrawals, KDIC said. 

Depositors of Jeil Savings Bank visit its branch in Yeouido, Seoul, Friday amid fears of a bank run following a probe into the lender’s alleged illegal loans to a property developer. (Kim Myung-sup/The Korea Herald) Depositors of Jeil Savings Bank visit its branch in Yeouido, Seoul, Friday amid fears of a bank run following a probe into the lender’s alleged illegal loans to a property developer. (Kim Myung-sup/The Korea Herald)

“The recent series of suspensions of savings banks and consequent fear among customers, which started with that of Samhwa Sanvings Bank on Jan 14, seems to have initiated the phenomenon,”a KDIC official said.

The Financial Services Commission, the nation’s financial watchdog, halted the operations of seven other debt-saddled savings banks in February. They are Busan, Busan II, Jungang Busan, Daejeon, Jeonju, Bohae and Domin.

The KDIC said the figure was on the rise prior to the consecutive suspension of savings banks. It marked 76.4 trillion won in last June and has been increasing ever since, it said.

The deposit at local savings banks thus dropped to 62.4 trillion won as of February.

The figure had slowly been rebounding with Koreans’ distrust mitigating, until a possible illegal lending by Jeil Savings Bank officials was revealed on Tuesday.

Massive withdrawals were made in response to the bank officials’ alleged illegal lending of 60 billion won to real estate developer Synersys in return for receiving 181 million won in kickbacks from the developer.

A total of 180 billion won was withdrawn from Jeil Savings Bank on Tuesday and Wednesday, while another 35 billion won was taken out from Jeil II during the two days, which is an affiliate of the institution.

By Koh Young-aah (youngaah@heraldcorp.com)