The South Korean government will acquire the nation’s two biggest insolvent commercial banks next month and sell them to foreign investors under a plan announced Friday aimed at helping satisfy a promise to open financial businesses to outsiders.
The institutions to be taken over, Korea First Bank and Seoul Bank, were overloaded with bad debts and effectively collapsed in recent weeks, contributing to the financial crisis that has devastated the value of South Korea’s currency and stock market, caused a wave of bankruptcies and raised the fear of default on tens of billions of dollars in foreign loans.
Korea First recorded $2.67 billion in unrecoverable debt; Seoul Bank had $2.14 billion.
Under a plan announced by the Finance and Economy Ministry, the government will take a controlling interest in the banks in early February by sinking the equivalent of $738 million into each before putting them up for sale.
South Korean news media said that Citibank, a Citicorp unit, had expressed interest in buying at least part of Korea First and that Chase Manhattan was considering an investment in Seoul Bank. Citibank has repeatedly denied any interest in either bank. Chase officials in New York declined to comment.
