Top regulator vows to weed out law-breaking savings bank shareholders

SEOUL, May 27 (Yonhap) -- South Korea's top financial regulator pledged Friday to weed out law-breaking major shareholders of savings banks as part of efforts to revamp the scandal-ridden sector.
Major shareholders have been blamed as the prime culprits in a series of bribery and illegal lending cases involving suspended savings banks. The Financial Services Commission (FSC) suspended eight savings banks in January and February due to their capital dearth and inability to meet deposit withdrawal demands.
Prosecutors have arrested or indicted a handful of main shareholders and executives, holding them accountable for the illegal lending and mismanagement of deposits, which led to massive capital losses and business suspension.
"The watchdog will regularly conduct strict eligibility tests on major shareholders from the second half of this year in order to stamp out unqualified shareholders," FSC Chairman Kim Seok-dong said in a report to lawmakers.
He said the FSC will conduct eligibility tests on 294 major shareholders of 67 local savings banks in order to look into potential misconduct.
Chairman Kim also said the FSC will adopt a rule to investigate major shareholders of savings banks and tighten punishment on those who commit wrongdoings in a bid to fend off misconduct committed at the cost of the banks' financial health.
"The FSC will introduce a system that enables the Financial Supervisory Service (FSS) to directly investigate and supervise major shareholders and other wrongdoers in addition to executives of savings banks," Kim said. The FSS is the executive arm of the FSC.
He said the watchdog will also impose tougher administrative and legal punishments on law-breaking major shareholders.