GNP lawmakers seek to recoup depositors’ losses

Some Grand National Party lawmakers are considering ways to enable depositors of suspended savings banks to partially recoup lost money, officials said Thursday.

They are also mulling giving the state-run Korea Deposit Insurance Corp. the right to independently inspect savings banks to keep the Financial Supervisory Service in check. Critics said the FSS has wielded a “monopolistic” inspection authority over banks.

GNP members of the National Assembly’s National Policy Committee held a special session to discuss these measures and others to help alleviate the suffering of thousands of account holders at the distressed banks.

The Financial Services Commission has so far this year suspended business operations of eight savings banks nationwide for capital shortages, with one of them sold in March to Korea’s second-biggest financial group, Woori Finance Holdings.

“It is inappropriate to pass all responsibilities to depositors as financial authorities’ negligence in their oversight of the banks has contributed to their financial problems,” Rep. Lee Sung-hun, who represents the GNP members at the committee, said in an interview.

“There were opinions that the government should recoup some of their losses. We should have more discussions on details on how to do that.”

The participants at the session also agreed to discuss the revision bill a group of lawmakers representing Busan recently submitted to parliament to offer full compensation for the depositors through the state deposit insurance fund.

Critics claimed the bill was a legally inappropriate “populist one” aimed at winning the hearts of voters in their constituencies, stressing that full compensation could trigger moral hazard.

The GNP lawmakers also discussed ways to expand bankruptcy dividends for the victims. The dividends are to be collected after the authorities recoup money the largest shareholders of the troubled banks had embezzled and the money illegally withdrawn after or before operating hours.

The measures requiring the government to offer bankruptcy dividends to depositors before the court trials get underway were also mentioned, officials said.

As part of efforts to strengthen the FSS’s role in inspecting savings banks, the lawmakers expressed the need to designate the FSS as a public organization and have them receive a regular audit by the Board of Audit and Inspection.

The FSS has come under mounting criticism in the wake of a series of corruption scandals involving its staff and “lax oversight” over distressed savings banks. The government is stepping up efforts to reform the FSS and restore public confidence in it.

The lawmakers plan to convey what they have discussed to the government and seek to improve related regulations at its committee, officials said.

By Song Sang-ho (sshluck@heraldcorp.com)