Parliamentary committee agrees to compensate savings bank victims

(ATTN: RECASTS and UPDATES details in paras 5-8; ADDS finance minister's remarks in paras 9-11; RESTRUCTURES) By Kim Eun-jung SEOUL, Aug. 9 (Yonhap) -- Rival parties agreed Tuesday to reimburse individual victims of suspended savings banks for virtually all of their lost deposits, sparking criticism that lawmakers are bending rules to woo voters ahead of next year's general elections. The government has suspended operations of nine savings banks so far this year due to their weak financial standing stemming from bad real estate loans. Among them was Busan Savings Bank, the nation's largest savings bank, which is at the center of a massive influence-peddling scandal involving bank officials, state auditors and politicians. Victims have waged protests in front of the National Assembly over the past weeks, calling for strong action for those responsible for poor management and regulations and full compensation for their deposits kept in the troubled banks. Hundreds of Busan Savings Bank customers have also lodged class action suits against bank officials, state regulators and accountants, holding them accountable for fraudulent accounting and lax inspection. On Tuesday, ruling and opposition lawmakers agreed to enact special legislation to use the Deposit Insurance Fund to compensate individual customers and bond investors for their losses of up to 60 million won (US$55,325), sources close to the matter said. Losses of up to 60 million won will be fully reimbursed, while a differential compensation rate will be applied to deposits exceeding 60 million won, the sources said. The agreed amount is smaller than the 200 million won announced earlier in the day. Financial officials said the original plan, if adopted, would have needed up to 280 billion won to compensate the victims. Finance Minister Bahk Jae-wan voiced objection to the 200 million compensation plan, citing that it could hurt market disorder and unfairness. "(The plan) will disturb financial market orders and dent fiscal rules," he said, "I understand the victims' positions, but resolving the problem through such means is undesirable since it goes against the rules." Bahk also said the move may raise questions about fairness among victims of other financial institutions that were suspended. It's not known immediately how Bahk responded to the reduced compensation plan. The reduction came after critics accused the parties of bending rules to woo voters ahead of next year's parliamentary elections. Current law allows a state deposit insurance corporation to cover only up to 50 million won for customers of failed banks. Lawmakers belonging to a parliamentary committee charged with investigate the suspended savings bank said they will submit a bill on the new deposit protection scheme this month.