S. Korea Spends $8.44 Billion to Bail Out Savings Banks Since 1997

South Korea has spent more than 11 trillion won ($8.44 billion) to bail out unhealthy savings banks since the 1997-98 Asian financial crisis, Yonhap News reported quoting a report from the financial watchdog Sunday.

As of the end of October, the government supplied a total of 11.4 trillion won _ 8.5 trillion won in public funds and 2.9 trillion won in funds supplied by the state-run Korea Deposit Insurance Corp. (KDIC) _ since the Asian financial crisis, according to the Financial Services Commission.

Public funds were created by selling government-guaranteed bonds in a move to buy bad assets and bail out financial firms after the KDIC and the state-run debt clearer received parliamentary approval.

The KDIC set up funds to cover possible losses of depositors in the case that financial firms could not respond to customers' calls for deposit withdrawals. The funds were created by receiving insurance premiums from financial firms.

South Korean thrift banks are suffering from worsening financial conditions as the slowing economy has ballooned their bad debts.

In particular, local savings banks lending for real estate project financing have been affected by the slumping housing market, with the default rate for those loans rising.

The Korea Asset Management Corp. plans to supply 1 trillion won to buy bad debts related to savings banks' project financing.