Why Busan Savings Bank Became the Center of the 'Daejang-dong Issue' [Seungseop Song's Financial Light]

Finance is difficult. It is entangled with confusing terms and complex backstories. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and to consistently follow the flow of money, a foundation of financial knowledge is essential. Accordingly, Asia Economy selects one financial term each week and explains it in very simple language. Even those who know nothing about finance can immediately understand these ‘light’ stories that turn on the bright ‘light’ of finance.

On October 15, 2011, victims of Busan Savings Bank gathered in front of the Financial Supervisory Service. Depositors with losses exceeding 50 million won and subordinated bond investors affected by the suspension of Busan Savings Bank's operations demanded that "financial authorities be punished" on that day.

[Asia Economy Reporter Song Seung-seop] The controversy over preferential treatment and lobbying allegations in the Daejang-dong development has not subsided. As suspicions arise that prominent politicians from both ruling and opposition parties are involved, major domestic financial companies are also being mentioned. Among them is the ‘Busan Savings Bank,’ which went bankrupt in 2012. Why is a regional savings bank that no longer exists being mentioned in the Daejang-dong issue?

Busan Savings Bank caused property damage amounting to 626.8 billion KRW to about 38,000 depositors. During the ‘Savings Bank Crisis,’ rumors circulated that it was a risky institution, and depositors began withdrawing cash, leading to a suspension of operations in 2011. Subsequently, numerous illegal and corrupt allegations surfaced, including risky loans amounting to thousands of billions of KRW, executives establishing paper companies, lobbying of regime insiders, and accounting fraud.

Afterward, the prosecution launched a large-scale investigation. However, recently, problems arose during the investigation process, and allegations emerged that former Prosecutor General Yoon Seok-yeol was involved.

Namwook, a key figure in the Daejang-dong development lobbying and preferential treatment allegations who was staying in the United States, returned to Korea on the morning of the 18th through Incheon International Airport Terminal 2. He was arrested by prosecution investigators and is leaving the airport. Photo by Moon Honam munonam@

In 2009, Busan Savings Bank lent 115.5 billion KRW through project financing (PF) to lawyer Nam Wook and accountant Jung Young-hak. The funds were used to promote the private development project in Daejang-dong. The loan brokerage was conducted by a Busan Savings Bank official, Mr. A. Mr. A took about 1 billion KRW in kickbacks as a commission.

In 2011, the Central Investigation Department of the Supreme Prosecutors' Office began investigating Busan Savings Bank. According to media reports, Mr. A hired former special prosecutor Park Young-soo as a lawyer through Kim Man-bae, who was then a prosecutor-beat reporter. Mr. A was also questioned as a witness but was not indicted. The Daejang-dong PF case was not included in the investigation. At that time, the lead prosecutor for the Busan Savings Bank investigation in the Central Investigation Department was former Prosecutor General Yoon Seok-yeol (Head of Investigation Division 2).

Mr. A was indicted only in 2015 when the Suwon District Prosecutors' Office Special Division began investigating the Daejang-dong development project. He was sentenced to 2 years and 6 months in prison.

Ruling Party: "Lenient Investigation" vs. Yoon Seok-yeol: "A Comedic Story"

Yun Hojung, floor leader of the Democratic Party of Korea, is attending the National Assembly inspection countermeasure meeting held at the National Assembly on the 12th, delivering opening remarks. Photo by Yoon Dongju doso7@

The ruling party alleges that the Daejang-dong-related matters were excluded during the Busan Savings Bank investigation and accuses former Prosecutor General Yoon of conducting a ‘lenient investigation.’ Yoon Ho-jung, floor leader of the Democratic Party of Korea, claimed at a National Assembly audit strategy meeting on the 12th, “Those suspected of leading the poor investigation were former Prosecutor General Yoon, who was the lead prosecutor at the time, and Kim Hong-il, former head of the Central Investigation Department, who chaired the special committee for investigating political manipulation in Yoon Seok-yeol’s campaign.”

During the National Assembly audit, related claims continued mainly from ruling party lawmakers. On the 21st, Democratic Party lawmaker Song Ki-heon criticized at the National Assembly Legislation and Judiciary Committee audit, “At that time, three people each were arrested and prosecuted in Incheon Hyoseong-dong and Yongin Sanghyeon-dong, where the loan amounts were smaller than in Daejang-dong,” and “In Daejang-dong, only the loan broker was questioned as a witness, and the investigation was closed as is.”

Yoon Seok-yeol, the People Power Party's presidential primary candidate, and Representative Joo Ho-young, who joined as the head of the campaign committee, held a joint press conference at the National Assembly on the 17th. Photo by Yoon Dong-ju doso7@

Former Prosecutor General Yoon, currently running in the People Power Party’s presidential primary, flatly denied any lenient investigation. After a press conference at the National Assembly Communication Hall on the 17th, he told reporters, “It’s really a comedic story,” and rebutted, “It’s like criticizing the Central Investigation Department for investigating Samsung’s slush fund case but failing to find Samsung’s lobbying. That’s the same kind of logic.”

Regarding the claim that Mr. A was sentenced to prison belatedly in 2015, Yoon said, “We already closed the case in 2011, so handling it three years later is a case of bribery solicitation,” and added, “It involved receiving bribes for public official lobbying, so it is unrelated to the Central Investigation Department’s case.”