Minority shareholders to be given priority in acquiring new stocks

The government is under fire for ignoring the basic principle of the capital market that "investors are responsible for their own stock investments."

The criticism came Thursday after the government decided to offer minority shareholders with preemptive right in buying shares of the six ailing banks that were ordered to write off all their capital and made eligible to receive further public funds.

The government was also criticized for maintaining an excessively lukewarm attitude in calling to account officials who often reversed their remarks regarding the banks' capital reduction.

Finance-Economy Minister Jin Nyum and Financial Supervisory Commission (FSC) Chairman Lee Keun-Young announced measures to help the minority shareholders following the capital reduction. They unveiled the plan in a press conference at the Government Building in Kwachon.

Minister Jin said, "Minority shareholders with less than one percent stakes of Hanvit, Seoul, Peace, Cheju, Kwangju and Kyongnam banks will be granted rights to subscribe to new shares when the financial holding company is inaugurated or after the public funds are injected."

This decision is an excessive measure in that it goes against the principles of the capital market because the stock value of the banks whose stocks are to be scrapped is less than 1 won.

The government earlier decided to cover about one third of the losses of the minority shareholders by granting them the right to request the purchase of shares when it announced the capital reduction at the bad banks.

In addition, the banks are to become healthy banks whose debt-to-equity ratios will easily reach 10 percent, as required by the Bank for International Settlement (BIS), when public funds of 7.1 trillion are injected into the newly-established financial holding company.