Bank Bailout Plan Approved
By Yoon Ja-young
Staff Reporter
The National Assembly passed a massive bailout scheme for banks, in which the government will guarantee their foreign currency debt for three years.
The lawmakers, however, put strict conditions on the measure, which include banks' efforts to sell overseas assets and slash bank executives and employees' high salaries.
Under the motion, the government will guarantee up to $100 billion in foreign currency loans to be raised by banks through June next year for three years.
Among 238 lawmakers who participated in the vote, 218 voted for the motion.
The banks have been suffering dollar shortages recently amid the global credit crunch. They have been resorting to short-term borrowing, but were having difficulty paying off foreign debts amid capital market contraction.
The measure, however, raised criticism as taxpayers' money is being used to bail out banks that have recklessly expanded foreign borrowing. ``The public fund infusion saved banks only 10 years ago, but the banks haven't fulfilled their responsibilities. They should be answerable,'' said Park Byeong-seug, chief policymaker of the main opposition Democratic Party in a radio interview, Thursday.
The conditions put on the motion rule that banks should make efforts on their part such as selling assets overseas and cutting too much salaries and stock options on bank executives and employees. If the government ever comes to pay for the debt for the sake of the banks, it would have the right to indemnity, and the management will also be responsible.
The banks were also required to extend loans on healthy small and medium-sized firms and cut interest rates on household loans for the working class. It requested the banks to pay only a moderate amount in dividends to shareholders, and called for stronger supervision on their financial soundness.
However, the measure is expected to see resistance from bank labor unions. Banks have already been under slimming down projects. Banks recently announced cutting salaries of top executives, but they have only gone so far as to announce they will ask employees to voluntarily participate in a wage-freeze policy.