Post Office to share burden of public fund losses

The nation’s Post Office will be required to share the burden of public fund losses with banks and other financial institutions over the next 25 years.

Announcing a draft bill on the payment of unrecoverable public funds yesterday, the Ministry of Finance and Economy said the Post Office will be forced to pay about 45 billion won yearly until 2027 under the burden-sharing plan.The annual burden is equivalent to about 0.1 percent of the Post Office’s customer deposits and insurance assets, which are currently estimated at 47 trillion won.

The 47 trillion won breaks down into 30 trillion won in deposits and 17 trillion won in insurance assets.

The office has never paid any deposit insurance premiums to the state-run Korea Deposit Insurance Corp. (KDIC) since its customer deposits and insurance assets are guaranteed directly by the government.

Banks and non-bank financial institutions will have to pay 0.1-percent special deposit insurance premiums to the KDIC over the next 25 years to pay for 20 trillion won out of 69 trillion won in public fund losses.

The government is to pay the remaining 49 trillion won in losses by mobilizing taxpayers’ money.

The country has raised a total of 156 trillion won in public funds to normalize the troubled banking system since the 1997 financial crisis.

The government estimated that 69 trillion won of the total public funds were classified as losses, as they could not be recovered from beneficiary financial institutions and their debtors.

It plans to issue 13 trillion won in state bonds next year in order to roll over 9.7 trillion won in government-guaranteed bonds, coming to term in 2003, which were floated to raise public funds.

A total of 36 trillion won in state bonds will be issued until the end of 2006 to roll over maturing public fund-related bond issues.

The finance ministry said it plans to submit the draft bill on the payment of public fund losses and other revision bills to the National Assembly next month.

It said the bills, if approved by parliament as scheduled, will become laws and take effect starting Jan. 1.

However, it was reported that the Ministry of Information and Communication, which controls the nation’s Post Office, was opposing the decision by the finance ministry to force the office to share the burden of the public fund losses.