Troubled savings banks in Seoul see massive bank runs

Customers looked anxious Friday in flocking to the branches of three to four savings banks reportedly facing closure. Financial authorities will soon announce a third round of savings banks subject to business suspension.

Customers and tellers argued and even engaged in physical altercations at certain branches. The number of visitors exceeded well above 1,000 even before noon at some branches. Long queues formed from early in the morning before branches opened, while customers who failed to enter branches sitting on top of newspapers on the street and waited a long time to enter.

Financial authorities say more than 400 billion won (353 million U.S. dollars) in savings were withdrawn Friday from five savings banks (including one subsidiary) that are rumored to face suspension. Depositors pulled out a combined 600 billion won (530 million dollars) for two days as 161.8 billion won (143 million dollars) in savings were withdrawn from the banks on Thursday. Massive bank runs have effectively occurred even before the announcement of savings banks subject to suspension.

○ Calls on depositors not to withdraw prove futile

As customers flooded in from early morning on Friday, the Euljiro branch of a savings bank in Seoul closed the iron shutter of its main entrance, and allowed in people who received waiting numbers to enter via emergency entrance. Those who did not get in complained to bank staff, such as “Let me in” and “What will happen to my savings?” The tightly shut entrance just had a sign reading, “The counters are busy. Please follow the staff’s instructions.”

At the branch, a 60-year-old woman sighed and said, “I saved more than 60 million won (53,000 dollars) for my retirement. I`m extremely nervous. I`m not sure if I can withdraw my money today."

Staff desperately tried to appease consumers. One bank staff said, “(The savings banks to be closed) have not been announced yet. Savings of up to 50 million won (44,000 dollars) are guaranteed for payment.” This savings bank had far more customers visiting its branches to withdraw their money than others. This was because its chairman openly hinted in a recent media interview that his bank is undergoing review for exit.

The number counter at the Euljiro branch of another savings bank closed around 11 a.m. With around 300 people waiting in the queue, the number counter machine ran out of paper. A 60-something man told a Dong-A Ilbo reporter, “When I deposited my money at Prime Savings Bank, authorities announced the bank’s business suspension two weeks before my certificate of deposit matured. I cannot trust bank staff. The capital adequacy ratio of the Bank for International Settlement is also deceiving. I have no job and am living on my pension,” expressing his despair.

○ Depositors with more than 50 million won on edge

Probably due to lessons learned from last year’s savings bank fiasco, few people with deposits exceeding 50 million won (44,000 dollars) were found at bank branches Friday. Certain depositors looked desperate, however, due to fears that they could lose their money if they did not withdraw it that day.

A 35-year-old man at a branch of a savings bank told Dong-A, “I have 100 million won (88,000 dollars) in savings, and a lady who got a waiting number in the 400s gave me her number, saying she could no longer afford to wait,” adding, “Exhausted due to the long wait, I stopped by home to have lunch but hurriedly returned because my wife told me I could lose my place and asked me to go back immediately after lunch.”

A 50-something woman who allegedly invested 11 million won (9,720 dollars) in subordinate bonds of the savings bank said anxiously, “I bought the bonds three years ago because I was promised a high yield, so I never expected this situation to occur.”

At sites near savings bank branches, staff from insurers and brokerages were staging marketing activities, with one saying, “Please deposit your money with us as savings banks are unreliable.”

ryu@donga.com hparks@donga.com