The nation’s savings banks have reaped more than 1 trillion won ($900 million) in service fees per annum over the past five years, a lawmaker revealed Thursday.
Citing data gained from financial regulators, Rep. Bae Young-shik of the ruling Grand National Party unveiled the figure during a two-day parliamentary hearing on the Financial Services Commission and the Financial Supervisory Service on possible failures in cracking down on irregular practices among savings banks.
Bae cited FSS data showing that the combined service fees, also known as commissions, charged to borrowers by savings banks came to 8.1 trillion won over the past five years,.
The fees were different from regular annual interest on savings banking loans, FSS officials said.
The fees came to 1.46 trillion won in 2010, 1.42 trillion won in 2009, 1.38 trillion won in 2008, 1.01 trillion won in 2007 and 1.39 trillion won in 2006. The data showed the fees stayed at 750 billion won in 2005.
Financial Services Commission Chairman Kim Seok-dong (left) responds to a question from lawmakers at a parliamentary hearing on the closure of several savings banks Thursday. (Yonhap News)
Bae cited a case in which a construction company had to pay 840 million won in service fees after being issued loans totaling 7 billion won, pointing out that the fees were equivalent to 12 percent of the loans.
“I don’t understand why (many) savings banks are suffering deficits despite the great number of service charges,” he said.
He stressed that it was urgent for financial regulators to discipline rule-violators for irregular practices, including embezzlement.
Rep. Shin Kuhn of the main opposition Democratic Party reprimanded the FSS and the FSC for failing to keep their insider information confidential.
He said several customers of Busan Savings Bank withdrew large deposits right before regulators suspended operations of the distressed bank in February.
“It has been found that a customer took out 14 billion won in deposits from a branch of Busan Savings Bank a day.”
During the National Assembly hearing, FSS Governor Kwon Hyouk-se pledged to conduct an intensive probe.
“We will consider filing a complaint against individuals (engaged in leaking information),” Kwon said.
In a similar vein, an opposition lawmakers claimed Monday that several financial regulatory officials withdrew their deposits from savings banks right before the distressed secondary banking sector hit the market.
FSC Chairman Kim Seok-dong told lawmakers that it would be desirable for ailing savings banks to be sold on the basis of market principles.
Regulators suspended the operations of eight savings banks out of more than 100 players during the first quarter, as weak capital strength and liquidity crunches sparked by deposit withdrawal.
Most of the suspended banks are expected to be up for sale as the financial authorities are seeking to overhaul the sector, which was hit hard by growing sour property-linked loans.
“Concerning the restructuring of the savings bank sector, the government is willing to allow financial players to buy ailing savings banks if they pursue takeovers on the basis of market principles,” Kim said.
During the two-day hearing, which ended Thursday, lawmakers claimed that a set of eased regulations on the secondary banking sector and subsequent lax supervisions are blamed for a spike in distressed savings banks as they excessively extended construction loans by riding over such eased rules.
But former and incumbent top finance-related officials tried to shun away from responsibilities for contributing to the distress among savings banks, arguing that previous policy measures were taken based on judgments that were reasonable at the time.
The parliamentary hearing has been highlighted as high-profile figures, including Finance Minister Yoon Jeung-hyun and former chiefs of the FSC and FSS, were called to the stand in front of lawmakers.
(kys@heraldcorp.com)