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Credit Card Companies’ Capital Difficulties… Withdrawal of Money from Investment Trust

Credit Card Companies’ Capital Difficulties… Withdrawal of Money from Investment Trust

Posted November. 21, 2003 22:49,   


The worsening capital difficulties of LG Card are stirring up an uneasy atmosphere in the financial markets, and the money being withdrawn from the investment trust is reaching a quick pace.

As a result, concerns are being raised that if the capital problems of LG Card are not suitably addressed, it will have a huge impact on the financial markets.

According to the government and the investment trust on November 21, there was a withdrawal of 13.2576 trillion won on November 20, resulting in a decrease in money given to the trust from 155.0594 trillion won as of October 28 to 141.8018 trillion won. In particular, 2.1 trillion won was withdrawn on both November 19 and 20, and it appears that the withdrawal of money will speed up as time goes by.

A related person from the investment trust said, “The rise of the interest rate is the biggest cause of the problem, but it is true that the credit card company’s liquidity crisis, which was stirred up by LG Card, is causing investors to feel uneasy in investing.”

LG Card stopped its cash withdrawal service through credit cards from 2 p.m. to 5 p.m. on November 21.

Regarding this, LG explained, “It simply happened because of a network failure.” However, part of the financial world gave an opinion stating that “LG stopped the cash service because of short funding.”

Meanwhile, LG Card creditors claimed the shares of LG Inc (5.46%) held by Koo Bon-Moo, chairman of LG Group as well as Chairman Koo’s relatives’ shares as additional financial security. Also, the creditors demanded, “LG should deposit 700 billion won in advance by the end of this year, which LG was supposed to have invested.”

In regards to this, LG Group strongly resisted, saying, “Such actions by the creditors mean the same as LG’s abandonment of its control rights.” LG Group is also having difficulties in its negotiation to support LG Card.

On the other hand, Kim Jin-Pyo, Minister of Finance and Economy and Deputy Prime Minister, said, “I will take aggressive actions in order for the credit card company’s problems not to cause any uneasiness to the financial market,” at the Future Economic Forum held at Hyatt Hotel, Itaewon-dong, Yongsan-gu, Seoul.

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