FSS to implement screening process for venture professionals

Ten mutual savings and finance companies that have been taken over by venture businessmen or M&A (mergers and acquisitions) firms have come under investigation by special prosecutors.

In addition, a screening measure will be adopted to filter out venture businessmen hoping to assume the management of financial institutions and use them as their personal treasury.

An official of the Financial Supervisory Service (FSS) reiterated Sunday that the illegal loan scandals involving Chung Hyun-Joon and Jin Seung-Hyun resulted from financial institutions that were taken over by a venture businessman and an M&A company. He also revealed that ten financial institutions in Seoul that experienced a heavy inflow of venture capital were under investigation.

The official said, "The venture businessmen and the M&A companies purchased stocks of financial institutions at rock-bottom prices resulting from the IMF crisis and used them as their personal treasuries for their business dealings."

"Prompted by the illegal loan scandals of Dongbang Mutual Savings and Finance Co. and Yeollin Mutual Savings and Finance Co., we are investigating financial institutions that have come under the control of venture businessmen in the last three years," he added.

Some time this week, the Ministry of Finance and Economy and the Financial Supervisory Commission (FSC) will announce preventive measures for the illegal control of financial institutions. The measure is expected to include a screening process for those who attempt to assume control of financial institutions, the possibility of forced closure should three separate loans be made to any individual investor - regardless of whether the combined loan amount exceeds the capital investment -- and increased legal penalties for loans to investors, as well as an internal watchdog system.

Accordingly, upon the discovery of loans being made to an investor on three separate occasions, the institution will be forcibly closed and the investor and management reported to the Prosecutor¡¯s Office.