Korea Merchant Banking defaults on loans

Korea Merchant Banking, despite major shareholder Hana Bank¡¯s efforts to normalize its management, faced the final default Thursday. Consequently, a wave of turmoil is expected once again in the merchant banking industry.

According to the financial sector Thursday, Korea Mechanist Banking defaulted for the first time Wednesday, when it failed to make payments on 14 Billion and 90 Million won worth of notes that matured and were returned to Cho Hung Bank. As Korean Merchant Banking failed to make the payments Thursday, it faced the final default.

The Financial Supervisory Service has suspended its business beginning September 1 for three months, and plans to request for a total capital decrease if more liabilities than assets exist after an asset-liability examination.

The possibility of putting Korea Merchant Banking under Korea Deposit Insurance Company as an affiliate after injecting it with public funds will be reviewed. Depositors will not be able to withdraw their money during the period of Korea Merchant Baking¡¯s business suspension, but will be fully guaranteed by the deposit insurance policy after three months.

Park Hyeon-Jin witness@donga.com