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Prosecutors raid 7 newly-suspended savings banks

SEOUL, Sept. 23 (Yonhap) -- Prosecutors on Friday raided seven savings banks whose operations were suspended last week due to large debts and insufficient capital in search of possible irregularities by the executives and large shareholders of the banks.

Scores of prosecutors and police investigators began searching head offices of the seven banks and the homes of their executives and major shareholders simultaneously at about 10 a.m. for evidence supporting allegations that they misappropriated company funds.

The country's financial regulator halted operations of the seven troubled banks, including major players Jeil and Tomato, last weekend after a industry-wide asset stress test revealed a dearth of capital at the banks.

The suspensions led to massive deposit withdrawals and protests by depositors concerned with potential savings losses.

The raid came one day after the prosecution and other financial market authorities teamed up to launch a special investigation of the widening savings bank turmoil.

About a dozen other savings banks were suspended in the first half of 2011 due to their capital shortages and deposit losses, driven by bank heads' and major shareholders' reckless investment decisions.

Several heads and large shareholders of the savings banks suspended in early 2011 were convicted of embezzlement and breach of duty by causing massive losses for the lenders.

 

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