By Kim Tae-jong
The prosecution said Thursday it will launch an investigation into savings banks subject to business suspension as early as next week. Now, up to four savings banks are expected to face administrative measures imposed by the Financial Supervisory Service (FSS), prompting concerns over another bank run.
“Basically, we will launch a probe at the request of the financial regulator after they announce the list of savings banks for business suspension,” a prosecutor said. “But they haven’t yet requested us to launch a probe.”
Depending on the probe results, the savings banks that will face business suspension will then face judicial punishment for alleged illegalities as well as administrative measures from the FSS.
The FSS will suspend business operations at savings banks at the end of this week, after its internal audit of savings banks. But the FSS refuted some media reports that they have already requested the prosecution to launch a probe into savings banks.
In September 2011, the FSS ordered the four banks to improve their business and stabilize their financial health. The regulator has since conducted an audit to see whether they were involved in any irregularities such as embezzlement and illegal loans.
The investigation is expected to deal a fatal blow to the four and their account holders. Their assets are estimated at 10 trillion won with over 1 million account holders, many of whom are expected to rush to bank branches to withdraw their deposits.
Under the law, account holders will obtain payment guarantees of up to 50 million won, but over 100,000 had more than this deposited ― an aggregate total of 8.1 trillion won ― as of the end of February.
Last year, the financial authorities ordered a total of 16 savings banks to shut down due to their weak financial health and heavy debts and it plans to strengthen regulations for the sector, including increasing non-loss provisions and improving their Bank for International Settlements (BIS) ratios.