Suspended savings bank customers rush to get deposits

SEOUL (Yonhap) - Customers of suspended South Korean savings banks rushed to retrieve their deposits on Thursday, the first day the government opened the system for provisional payments up to 20 million won (US$16,892).
South Korea on Sunday suspended the business operations of seven local savings banks in a move to overhaul the sector struggling with an overdose of soured property loans. The move affected roughly 640,000 customers who hold deposits of 11.3 trillion won.
Although the government fully guarantees holdings up to 50 million won, the suspensions incited panic among investors, triggering deposit withdrawals at normally-operating savings banks as well.
Earlier in the day, the state-run Korea Deposit Insurance Corp. (KDIC) opened a Web site where deposit holders can apply for provisional payments over the next two months. Branches of the suspended savings banks as well as major lenders also started receiving applications.
According to KDIC, around 40,000 applications had been filed as of 1 p.m. when the system incurred a temporary glitch. The deposit insurer said more than 100,000 applications are expected to be filed by the end of the day.
Meanwhile, the financial regulator said deposit withdrawals at normally-operating savings banks nearly halved as investor jitters calmed.
A total of 53.2 billion won was retrieved from 91 local savings banks as of 4 p.m., compared with 104.4 billion won on Wednesday, said the Financial Supervisory Service.
According to a report by the Korea Center for International Finance, global investment banks expect limited impact from the latest suspensions.
"The situation was largely expected and the deposits at the seven savings banks account for a mere 0.8 percent of the total deposits," the report said, adding the regulator's move helped stave off uncertainties about the struggling sector.
South Korea has suspended 16 savings banks this year.