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Savings bank victims file W900m lawsuit against KDIC
By Chung Joo-wonPublished : April 21, 2013 - 20:41
Bond owners who were victimized in the 2011-12 savings bank woes filed a group lawsuit against state-controlled Korea Deposit Insurance Corp. over the weekend, the Korea Finance Consumer Federation said Sunday.
A total of 573 suitors submitted a class action suit against Korea Deposit Insurance Corp. to the Seoul Administrative Court, claiming severe loss on transaction-frozen deposits in the wake of the savings bank fiasco.
Out of the lost 20 billion won, suitors claimed about 900 million won ($797,000) in insurance payments in the legal document.
The legal fight came after buyers of subordinate bonds of savings banks were excluded from insurance payments that were guaranteed to owners with “deposits or bonds,” as stipulated in the financial law.
As the state financial regulator suspended operations of these banks, the 573 customers lost about 20 billion won consequently, the KFCF contended.
These suitors had purchased subordinated bonds, which cannot be recouped in the case of liquidation, issued by 26 mutual savings banks nationwide. According to the state law, they can claim insurance money up to certain amount if the savings bank suspends operation or goes out of business.
“Owners of both the bank deposits and the bonds are entitled by the law to have claim on insurance money of up to 50 million won,” the KFCF stated, citing attorney Cho Jung-hwan, who took up the case for the bond holders.
“The KDIC violated the financial act by paying insurance money only to savings depositors. The entitled financial rights of subordinate bond buyers were trespassed,” the KFCF added.
But the KDIC argued that the disputed subordinate bond is nominally bond but its financial characteristics are far from typically recognized bonds, and claimed the suitors cannot benefit from the related act.
“This is an unprecedented case,” admitted attorney Cho Jung-hwan, the legal representative of the bond holders.
“But it is not easy for us to file a lawsuit that is doomed to be defeated. It is even more so with class actions,” he said.
By Chung Joo-won (joowonc@heraldcorp.com)
A total of 573 suitors submitted a class action suit against Korea Deposit Insurance Corp. to the Seoul Administrative Court, claiming severe loss on transaction-frozen deposits in the wake of the savings bank fiasco.
Out of the lost 20 billion won, suitors claimed about 900 million won ($797,000) in insurance payments in the legal document.
The legal fight came after buyers of subordinate bonds of savings banks were excluded from insurance payments that were guaranteed to owners with “deposits or bonds,” as stipulated in the financial law.
As the state financial regulator suspended operations of these banks, the 573 customers lost about 20 billion won consequently, the KFCF contended.
These suitors had purchased subordinated bonds, which cannot be recouped in the case of liquidation, issued by 26 mutual savings banks nationwide. According to the state law, they can claim insurance money up to certain amount if the savings bank suspends operation or goes out of business.
“Owners of both the bank deposits and the bonds are entitled by the law to have claim on insurance money of up to 50 million won,” the KFCF stated, citing attorney Cho Jung-hwan, who took up the case for the bond holders.
“The KDIC violated the financial act by paying insurance money only to savings depositors. The entitled financial rights of subordinate bond buyers were trespassed,” the KFCF added.
But the KDIC argued that the disputed subordinate bond is nominally bond but its financial characteristics are far from typically recognized bonds, and claimed the suitors cannot benefit from the related act.
“This is an unprecedented case,” admitted attorney Cho Jung-hwan, the legal representative of the bond holders.
“But it is not easy for us to file a lawsuit that is doomed to be defeated. It is even more so with class actions,” he said.
By Chung Joo-won (joowonc@heraldcorp.com)
