Welcome to BASE21

By Kim Myong-hwan

SEOUL, South Korea (Reuters) - At least 16,000 unionized workers at two of South Korea's largest banks began a strike on Friday to protest a proposed merger of the two lenders.

It was the biggest challenge yet to government-led financial reforms that so far have cost tens of thousands of jobs and $89.66 billion in public funds.

``We will not stand down until the merger plan is completely abandoned,'' said Nam Sung-sam, a leader of Kookmin Bank's 8,850 unionized workers.

Striking workers spent the day at a large training center in Ilsan, northeast of Seoul, with thousands setting up tents to spend the night.

Some branches of Kookmin and Housing & Commercial did not open at all. Those that did, opened late and offered severely restricted services.

``Tellers' services are almost paralyzed. We urge customers to use home-banking and Internet-banking to avoid trouble,'' Kookmin spokesman Lee Seung-jin said.

Seoul branches saw queues of 200 people or more for teller services, with waits so long that many customers simply left out of frustration.

Shares of Kookmin closed down 400 won at 14,800. Housing Bank ended down 50 won at 28,300.

The government, which had declared the action illegal and vowed to take stern measures, avoided clashing with the unionists and urged workers and the banks to resolve the matter on their own.

But both sides indicated they were far apart.

Merger A Must, Says Management

``The management thinks the merger is a must for survival and growth of the two banks and it will not make concessions,'' said Hong Ki-taek, chief spokesman for Kookmin Bank.

The so-called tripartite committee of labor, management and government said in a statement on Friday it had agreed to allow the two banks to decide whether to pursue a merger without government direction.

``Now the ball is in the unions' court,'' said Yang Sung-yong, spokesman for the Financial Supervisory Commission. ``That merger plan should be sorted out between the two banks.''

The unions have demanded the banks abandon altogether any plan to merge, which if it goes ahead would create South Korea's largest retail bank with assets of more than 157.9 trillion won ($133.8 billion).

``It is obvious the government has guided the merger plan. We can't trust the government until it says the plan is officially waived,'' said Nam of the Kookmin Bank union.

Government and bank officials said no further talks had been scheduled with the unions.

Analysts said merging Kookmin and Housing was not urgently necessary to sharpen the competitiveness of the country's banking industry.

Lost Credibility

``It is little hard to understand why the government is keen on the merger of the two blue-chip banks,'' said Kim Chul-jung, senior analyst at Jardine Fleming. ``What is important now is whether each bank can do a good credit analysis of their customers regardless of its size.''

An analyst at Dongwon Economic Research Institute said the government had lost credibility.

``It will be difficult for the government to blame the unions of the two banks. That's why we are not seeing the stern measures promised by the government,'' he said.

Finance Minister Jin Nyum said in a televised talk show on Thursday night that merging the two banks was not absolutely necessary.

Unions of four smaller banks, Peace, Kwangju, Cheju and Kyungnam, had called off their planned strike after the government promised they would have the chance to survive independently until June, 2002, even after they are included in a state-run holding company with Hanvit Bank, those banks said.

During the past three years, the number of workers in Korea's banking sector has dropped 35 percent to 73,400, the Financial Supervisory Commission said.

The government plans to pour another 40 trillion won into financial sector reforms but opposition politicians have demanded to know how the money is being spent and minor shareholders of banks involved in the reforms have complained about their losses.