[2020 National Audit] Widespread Unfair Transactions in Savings Banks Receiving 27 Trillion Won in Government Support

Assemblyman Song Jae-ho: "About 12 trillion won in suspicious transactions at 30 savings banks, 180 billion won compensation liability"

[Asia Economy Reporter Sunmi Park] It has been revealed that among the 30 savings banks that received 27 trillion won in government support funds and have yet to recover over 14 trillion won, the amount of suspicious transactions related to unfair loans and violations of major shareholder credit provision restrictions reached approximately 12 trillion won.

According to data received on the 21st from the Korea Deposit Insurance Corporation by Song Jae-ho, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, the total amount of suspicious transactions suspected of unfair dealings at 30 savings banks that received 27.03 trillion won through the government's special savings bank account was found to be 11.892 trillion won.

The savings bank with the highest amount of suspicious transactions was Busan Savings Bank, which triggered the 2011 savings bank crisis, with 2.674 trillion won. Following that, Jeil Savings Bank recorded about 1.538 trillion won, Tomato Savings Bank 1.495 trillion won, and Busan 2 Savings Bank 1.129 trillion won, with four savings banks each exceeding 1 trillion won in suspicious unfair transaction amounts.

By type of suspected unfair transactions, improper loan handling accounted for about 3.577 trillion won, the largest amount. This involved cases where savings banks provided PF loans in the past without adequately reviewing the business feasibility of the borrowing companies, ultimately leading to defaults. Next, violations of restrictions on credit provision to major shareholders amounted to 3.368 trillion won, and loans exceeding the credit provision limits for individual borrowers as stipulated by the Savings Bank Act reached 1.527 trillion won.

The Korea Deposit Insurance Corporation established a special account for mutual savings bank restructuring within the Deposit Insurance Fund in 2011 to secure funds for restructuring insolvent savings banks. The special account was funded through a portion of insurance premiums from insured financial companies covered by the Korea Deposit Insurance Corporation, deposit insurance fund bonds, and borrowings from various accounts within the deposit insurance fund. From 2011 to 2015, the special account supported a total of 31 savings banks with 27.17 trillion won in the form of investments, contributions, and insurance payments. The special account is a temporary account operating until 2026 and must be repaid within the deadline.

Excluding Daeyoung Savings Bank, which has completed repayment, the special account support funds for the remaining 30 savings banks amount to 27.03 trillion won. As of July this year, 12.85 trillion won has been recovered, leaving 14.18 trillion won still unrecovered. Based on the suspicious transaction data, the Korea Deposit Insurance Corporation has filed civil damage claims worth 350 billion won against former executives and management of each savings bank. So far, the amount for which liability for compensation has been assigned to management due to their fault through court victories has reached 180.6 billion won.

Tomato Savings Bank: Former Employees Received 5.85 Billion Won Through Loans and Contract Brokerage

Meanwhile, it was also revealed that employees of Tomato Savings Bank committed illegal bribery during the loan process for client companies. Former employees received a total of 5.85 billion won in exchange for corporate loans and contract brokerage.

The former president of Tomato Savings Bank prearranged in 2010 to receive 5 billion won as a commission for executing a loan to ‘Ga’ company, a distressed debtor of Tomato Bank. Later, the former president embezzled 5 billion won by withdrawing it by check from the loan account of ‘Ga’ company and used the money to repay his other loans. A former team leader, who was an employee of Tomato Savings Bank, also received 690 million won from the actual owner of ‘Ga’ company during the loan execution process and additionally received 160 million won for brokering a sales agency contract for another corporation where the actual owner was the representative.

This incident was uncovered about nine years later during an investigation by the Korea Deposit Insurance Corporation to identify recovery funds from companies that borrowed from savings banks supported by the special account.

Assemblyman Song Jae-ho stated, “The savings bank insolvency crisis caused pain and suffering to many citizens,” and added, “Unfair transaction suspicions and even bribery occurred in savings banks that received tens of trillions of won in government funds for smooth restructuring, which shows that their management was already excessively lax and negligent.”

He continued, “More than half of the special account, over 14 trillion won, remains unrecovered,” and emphasized, “Financial authorities and the Korea Deposit Insurance Corporation must take more proactive measures to ensure full recovery of all costs, including damages due to the fault of the savings banks.”

This content was produced with the assistance of AI translation services.