S. Korea spends US$8.44 bln to bail out savings banks

SEOUL, Dec. 28 (Yonhap) -- South Korea has spent more than 11 trillion won
(US$8.44 billion) to bail out unhealthy savings banks since the 1997-98 Asian
financial crisis, the financial watchdog said Sunday.
As of the end of October, the government had 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 deposit insurance agency 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 is increasing the amount of bad debt.
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.
sooyeon@yna.co.kr
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