By Kang Seung-woo
Amid growing concerns over the shutdown of savings bank, account holders rushed to branches of Jeil Savings Bank, Wednesday, to withdraw their deposits.
The secondary lender is being investigated by the Financial Supervisory Service (FSS) after its executives and employees were found to have given a 60 billion won illegal loan to a real estate developer.
The bank’s branch located in central Seoul saw a long line of about 300 customers from the beginning of business hours with the number growing to approximately 3,000 at around 2 p.m.
“Due to the business suspensions of savings banks, I am worried that Jeil Savings Bank may be ordered to halt its transactions. I am not sure if I will be able to withdraw my deposit of 50 million won today,” said one client.
Another branch in Yeouido also saw more than 100 depositors, who wanted to withdraw their money, at 1 p.m.
The bank run came after the Financial Services Commission (FSC), the decision-making arm of the FSS, suspended business operations at eight savings banks, including Busan Savings Bank, the largest secondary lender in the nation, earlier this year due to their low capital adequacy ratio caused by mass withdrawals.
The alarmed FSS started attempting to quell heightening fears about the bank run resulting in massive cash withdrawals, saying its ongoing inspection is to check personnel irregularities.
“The check-up is aimed at confirming corruption by the bank’s executives and employees, which prosecutors announced, not examining its fiscal soundness,” said Joo Jae-seong, the deputy governor at the FSS.
According to the financial watchdog, the bank’s Bank for International Settlements (BIS) ratio, a measurement of financial soundness, was 8.28 percent and bad loans accounted for 6.1 percent as of the end of last year, both of which are solid in the industry. In addition, its project financing (PF) loans stand at 520 billion won, representing 16 percent of its overall lending.
The FSS said that Jeil currently has about 300 billion won in cash and securities, so it is not expected to face a liquidity shortage over the short term.
The prosecution arrested an executive director of the bank Tuesday for making the illegal loan to a real estate development company after taking bribe.
