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On Monday morning, members of 24 labor unions belonging to the Korea Federation of Bank and Financial Labor Unions (KFBU) cast votes on whether or not to go ahead with the general strike planned on July 11. The KFBU plans to disclose the results of the vote on Tuesday afternoon. Lee Yong-duk chair of the KFBU said Monday that he was confident that more than 90% of the union members have voted in favor of the general strike. He went on to claim that unless President Kim Dae-jung accepts various demands made by the KFBU, the Federation is determined to go on with the general strike, beginning at 8:00 a.m. next Tuesday.

Meanwhile, the Federation is known to have decided to collect about W10 billion in funds to proceed with the strike by Thursday, and each bank labor union has begun raising funds through donations ranging from W100 million to W2 billion to pool a total of W10 billion. Bank labor union members in charge of bank computerization systems convened Monday evening and discussed ways to control the bank computerization network if the general strike is approved.

As the pressure from bank labor unions has been mounting, government officials and presidents of fourteen commercial banks held an emergency meeting Monday morning to discuss ways to head off the general strike, but no clear solutions were found. Lee Yong-keun, the Chairman of the Financial Supervisory Commission, said the labor unions’ move for the general strike has been a misunderstanding of the governments’ policy on the establishment of financial holding firms. He said that if or when the government implements new regulations on the establishment of financial holding companies in an attempt to consolidate banks which observed large amounts of public funds, there will be no trimming down of manpower or organizations of individual banks.

Meanwhile, the ruling Millennium Democratic Party has reportedly delivered its opinion opposing a sudden government-led restructuring of the financial sector. The ruling party expressed its stance opposing the speculated merger of public fund-injected commercial banks, Cho Hung, Hanvit and Korea Exchange.

Analysts commented that the reason why the second wave of restructuring in the financial sector is necessary is because the number of non-performing bonds and loans has snowballed and in some cases has reached trillions of won. Over the past three years the government has pumped in W101 trillion of public funds, but due to the bankruptcy of Daewoo in July last year, the Hyundai financial crisis and the Saehan Media application for a workout program, non-performing bonds have once again increased. In addition banks have lent W100 trillion to workout companies and 500 businesses with outstanding debts have applied for court protection and receivership.

The credit ratings of most domestic banks are falling, despite government announcements of the country passing through the economic crisis. Recently Korea Exchange Bank had to pay LIBOR +6.5% on foreign funds it borrowed, 1% up from the rate Hanvit Bank paid in February. Moodys is suspicious of normalization of Korean banks as whenever a problem occurred at a secondary financial institution the government forced them to assume responsibility.

Banks with huge non-performing loans have to make money through credit cards and foreign exchange dealing or attract outside investment. However, they still retain an over extended branch network and so it is difficult for them to make up for their large losses. The government plans to create a holding company of non-performing banks and to liquidate branches and excess personnel, but unions who saw 30% of their members sacked in 1998 are resisting this. They claim that the government is blaming powerless workers instead of management and itself for its intervention in preventing the fast liquidation of poorly managed businesses.