Wednesday, February 23, 2011

Korean Bank Run Spreading

Eighth Bank Closes Following "Massive Withdrawals"

"The quietest bank run that has so far completely evaded mainstream attention, that of Korea, is spreading, and an eighth bank has now shuttered after "Domin Bank, a savings bank with a capital adequacy ratio below 5 percent, voluntarily decided yesterday to suspend its operations temporarily because of massive withdrawals." As JoongAng reports: "The decision took both depositors and financial regulators by surprise since it was the first time that a local bank shut its doors on its own." Apparently the courageous decision by the Financial Services Chairman Kim Seok-dong to deposit $17,864 in a troubled bank has not done much if anything to prevent the locals from realizing that their banking system is built on a house of cards.

From JoongAng Daily:

Domin Bank, which has six branches in Gangwon, was placed on a watch list last week by the Financial Services Commission. The move triggered a bank run on Domin Bank.

According to Domin Bank, deposits amounting 31.8 billion won ($28.2 million) were withdrawn since last Thursday, including 18.8 billion won on Monday.

The news of Domin Bank’s temporary closure came as FSC Chairman Kim Seok-dong was visiting Mokpo, South Jeolla, where recently suspended Bohae Savings Bank is located.

Seok-dong unhappy:

“This savings bank was supposed to submit a management improvement plan to the FSC by Feb. 24,” said Kim. “We will now have to review whether [the closure] is even legally O.K.”

More classic quotes follow:

Bae Joon-soo, senior FSC deputy director, said, “I think it is legally and morally wrong for a financial firm to do such a thing.”

Now we get it: according to the banking cartel's ethical standard it is "legally and morally wrong" for a bank to admit it is insolvent."


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