Korea's Bad Bank Mergers- Three Blind Mice

Merger talks for government-owned banks such as Cho Hung Bank, Hanvit Bank and Korea Exchange Bank are slated for next month, just two months before the business of taking deposits changes.

Korea is pushing ahead with the merger of government-owned Cho Hung Bank, Korea Exchange Bank and Hanvit Bank out of concern that there may be deposit runs at weaker banks from September.

ôThatÆs because from January 2001, bank deposits will no longer be fully guaranteed,ö explains Simon Maughan, head of Asia-Pacific Banking Research at Lehman Brothers.

Most deposits in Korea are kept in short-term tenures, such as three-month funds. Koreans are, therefore, likely to start transferring their...

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