It is baffling to see lawmakers of both ruling and opposition parties trying to pass a bill to compensate victims of suspended mutual savings banks for their lost deposits. Public outcry has grown since the National Assembly committee on political affairs approved the controversial bill last week.
The rationale for the bill is that regulators and policymakers are responsible for the victims’ loss because they neglected the supervision of the troubled banks. Currently, depositors can enjoy protection of their savings of up to 50 million won ($44,500) under the deposit insurance law.
The problem is that the bill calls for the compensation of 55 to 60 percent of savings in excess of the deposit insurance cap. It also urges the government to reimburse holders of bonds issued by the ill-fated savings banks for their losses. At present, bond investors are not protected.
In every respect, it is nonsense to push for such a bill. The legislative move is apparently none other than lawmakers’ populist bid to woo voters ahead of the upcoming April general elections. It is disappointing that the governing Saenuri Party is in cahoots with the opposition Democratic United Party (DUP) to pass the bill through a general session of the Assembly later this month.
This bipartisanship is unusual, considering the dog-eat-dog partisan struggles over major issues, including the Korea-U.S. free trade agreement (FTA), the media reform package and the national budget bill. Members of the rival parties have often wielded violence at the Assembly to railroad those controversial bills or block them. This time, they are united. They are in the blind pursuit of gleaning votes without thinking about the legitimacy of the bill.
It is highly regrettable that the leadership of the two parties has agreed to approve the bill in order to win over residents in the southern port city of Busan. The Saenuri Party holds 16 seats in the nation’s second largest city, one of its key power bases. The DUP has only one seat there. But it plans to field more candidates in April.
Both parties seem to believe that the bill is crucial to attracting more voters in Busan where many depositors were hit hard by the suspension of the Busan Savings Bank last year. But the lawmakers should realize their legislation bid does more harm than good since it will benefit only a small number of victims at the sacrifice of all taxpayers.
The bill, if enacted, may shake the very foundation of the nation’s deposit insurance system, introduced after the 1997-98 Asian financial crisis. It could also hurt the order of the market that requires all players to be responsible for their own financial transactions.
Compensating the victims, who were in search of high-risk, high-yield products at the savings banks, will only lead to the violation of the constitutional spirit of fairness. It is also feared to infringe on legislative principles and threaten the rule of law. The bill is a kind of retroactive legislation that cannot and should not be accepted.
Another question is how to finance the compensation. Around 82,000 depositors and bond holders have suffered losses from the suspension of 18 savings banks since September 2008. If they are to be compensated, the government needs 102 billion won ($90 million). The deposit insurance could cover part of the sum but a huge amount of taxpayers’ money would also be needed.
We urge lawmakers to refrain from abusing the legislative mandate by scrapping the bill immediately. If passed, President Lee Myung-bak should veto it. Voters must wage a campaign to unseat those who vote for the bill, too. Let’s prove that populism won’t work in the elections.