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Run on savings after suspensions
Source: Agencies |
September 23, 2011, Friday
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HUNDREDS of worried customers queued overnight to withdraw their money from seven South Korean savings banks suspended over concerns about their financial strength.
South of the capital Seoul, more than 800 people, mostly in their 60s and 70s, gathered outside one of the banks suspended by the authorities on Sunday. Yesterday was the first day depositors could withdraw their funds.
"I arrived late last night, though I could barely stand due to osteoporosis," said 72-year old grandmother Park -Geum-Rae outside Tomato Savings Bank.
Tomato, along with six other small savings banks, had attracted customers by paying higher interest than mainstream banks. But the banks are heavily exposed to loans made to the country's ailing construction sector, and fears of a lack of sufficient capital led to suspension.
Concerns about the security of deposits spread to other small banks, although the pace of withdrawals was slowing by the time depositors could claim their money from the seven suspended banks.
A total of 40.8 billion won (US$35.5 million) in deposits had been withdrawn from 91 savings banks by noon yesterday, according to South Korea's financial regulator.
Credit rating agency Standard & Poor's said after the suspension that the problems in the sector did not represent a systemic risk. The seven suspended banks account for 0.8 percent of South Korea's deposits, S&P said.
Customers are eligible to recover provisional deposits of up to 20 million won each until November. Big lenders, such as Kookmin Bank, are to help provide money for customers at suspended savings banks.
The crisis has, however, claimed the job of one of President Lee Myung-bak's aides and caused ripples through the ruling Grand National Party, which faces parliamentary and presidential elections next year.
Im Dae-ok, a 65-year old retired man queuing for his money, said: "I do not know what the government is doing about this issue. Why are we suffering this pain? I think the government has to be changed next year."
South Korea's Yonhap news agency reported that the Supreme Prosecutors' Office would be investigating the seven savings banks on suspicion of poor management and corruption.
South of the capital Seoul, more than 800 people, mostly in their 60s and 70s, gathered outside one of the banks suspended by the authorities on Sunday. Yesterday was the first day depositors could withdraw their funds.
"I arrived late last night, though I could barely stand due to osteoporosis," said 72-year old grandmother Park -Geum-Rae outside Tomato Savings Bank.
Tomato, along with six other small savings banks, had attracted customers by paying higher interest than mainstream banks. But the banks are heavily exposed to loans made to the country's ailing construction sector, and fears of a lack of sufficient capital led to suspension.
Concerns about the security of deposits spread to other small banks, although the pace of withdrawals was slowing by the time depositors could claim their money from the seven suspended banks.
A total of 40.8 billion won (US$35.5 million) in deposits had been withdrawn from 91 savings banks by noon yesterday, according to South Korea's financial regulator.
Credit rating agency Standard & Poor's said after the suspension that the problems in the sector did not represent a systemic risk. The seven suspended banks account for 0.8 percent of South Korea's deposits, S&P said.
Customers are eligible to recover provisional deposits of up to 20 million won each until November. Big lenders, such as Kookmin Bank, are to help provide money for customers at suspended savings banks.
The crisis has, however, claimed the job of one of President Lee Myung-bak's aides and caused ripples through the ruling Grand National Party, which faces parliamentary and presidential elections next year.
Im Dae-ok, a 65-year old retired man queuing for his money, said: "I do not know what the government is doing about this issue. Why are we suffering this pain? I think the government has to be changed next year."
South Korea's Yonhap news agency reported that the Supreme Prosecutors' Office would be investigating the seven savings banks on suspicion of poor management and corruption.
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