South Korean banking unions on Tuesday threatened a strike to protest against government-forced mergers in the debt-stricken banking sector.
"If the government pushes ahead with forced mergers among banks and lay-offs, we will launch a general strike as early as next week," Lee Yohng-Deuk, head of the Korea Financial Trade Union (KFTU), told journalists.
The KFTU, which has some 80,000 members at 80 banks and other financial institutions, demanded the government abide by a July accord, which ruled out forced mergers.
The government had also promised to respect existing labor-management agreements which call for prior consultations with unions on job losses and realigning the bank sector.
"The government is forcing mergers among banks even though managers of those banks raise doubts about their synergy effects," Lee said.
The warning came as reports said Kookmin Bank and Housing and Commercial Bank (HCB) are to merge into a "super bank," and Korea Exchange Bank and Hanvit Bank will also be joined as part of the government-ordered consolidation of the banking industry.
Lee Keun-Young, head of the Financial Supervisory Commission (FSC), said analysts believed the merger between Kookmin and HCB would produce synergies.
He stressed the government was not forcing banks to link but banks themselves were "voluntarily" pursuing fusions.
Should the mergers between the four banks come off, some 10,000 out of 38,000 employees of the banks would lose their jobs, according to unions.
HCB vice president Kim Young-Il confirmed the bank was seeking partners but declined to give names. "We are considering all kinds of possible scenarios to merge with healthy banks," he told AFP.
Korea Exchange Bank head Kim Kyung-Lim told journalists the government last month proposed putting the bank under the wing of a government-led holding company.
Commerzbank AG of Germany, which holds a 31.6 percent stake in KEB, alongside the government's 32.2 percent stake, is "carefully considering" the offer, the KEB president said.
A KEB spokesman said Commerzbank AG was due to decide at a board meeting later Tuesday whether it would agree to a plan to merge KEB with Hanvit.
If the merger goes through, both KEB and Hanvit were likely to be integrated into the government-led financial holding company, the spokesman said.
KEB currently has 5,000 employees and Hanvit 11,000 employees.
KEB shares closed down 35 won at 1,470 won and Hanvit closed down five won at 940 won as the overall stock price index fell 2.1 percent to 543.08 points Tuesday.
The FSC said last week the government would inject seven trillion won (5.8 billion dollars) into six debt-weakened banks. After the injection, a financial holding company would be set up in February to run five banks: Hanvit, Kwangju, Peace, Cheju and Kyongnam.
The sixth, Seoulbank, will be auctioned off to foreign investors or taken over by the holding company by mid-2001.
The latest cash lifeline will come on top of about 100 billion dollars of state money already put into the financial system since the 1997 financial crisis.
The KFTU leader said the government was only focusing on redundancies rather than building an advanced banking system.
The International Monetary Fund (IMF), whose 58-billion-dollar bailout saved South Korea from financial meltdown in 1997, has cast doubt on the government's plan to merge non-viable banks under a holding company -- SEOUL (AFP)
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