Financial Institutions Suffer 16 Trillion Won Loss after Public Fund Injections

It turns out that employees and major stockholders of ailing financial institutions, in which public funds were utilized, were responsible for a loss of 16.3 trillion won.

According to a management white paper for public funds reported by the Ministry of Finance and Economy on Thursday, the Korea Deposit Insurance Corporation (KDIC) examined 485 financial institutions in which public funds were used after the 1997 foreign exchange crisis to find those responsible for poor management. It turned out that a total 5,741 employees and large stockholders were responsible for a 16.3739 trillion won loss.

Ranked by the amount of loss borne by financial institutions, merchant corporation banks (composite finance companies) ranked the highest in terms of losses with 5.7 trillion won in losses. Following were securities and investment trust companies with 3.1 trillion won in losses, insurance firms with 3.03 trillion won, savings banks with 2.05 trillion won, and commercial banks with 1.4 trillion won in losses.

By case, illegal unfair loans covered 53.9 percent of total losses. The National Credit Union Federation of Korea held the most responsibility for the ailing state of the industry with 4,326 people, and following were savings banks with 795, insurance firms with 228, commercial banks with 191, merchant banks with 160, and securities companies with 41.

Meanwhile, assertions that, among the 483 financial institutions in which the KDIC injected public funds not even a penny was recovered from 114 until recently, are being raised.

Lawmaker Lee Jong-koo (Grand National Party), a member of the National Assembly Finance and Economic Committee, said, “The KDIC injected public funds worth 106.7981 trillion won as of the end of June, and only recovered 26.0368 trillion won, a mere 24.4 percent.”

Also, public funds from four out of the 19 banks in which 44.1 trillion won was injected could not be recovered, not even a penny. It also showed up that nothing was recovered from 12 merchant corporation banks including Nara Investment Banking Corporation and Hans Merchant Bank, 15 insurance firms including Regentfire (Dongbu Insurance), four securities companies including Daehan Investment and Securities, and 71 savings banks including Donga Savings Bank.

However, the KDIC presented elucidating material and announced that there were only 11 institutes in which public funds were not recovered at all. In the case of the Commercial Bank of Korea and Hanil Bank that lawmaker Lee presented, the KDIC explained that after the two banks merged into the Hanbit Bank, it was incorporated into the Woori Financial Group, and a mistake was made in inserting the recovered amount from the two banks into the Woori Group’s account.

Yong Park Seung-Heon Lee parky@donga.com ddr@donga.com