Foreign banks operating in South Korea were hit by an interest rate spike last year while domestic banks posted record profits, financial watchdog the Financial Supervisory Service has said.
Combined net income at 32 foreign banks in Korea fell to $90 million in 2005, a drop of 68.7%. The FSS said that the decrease was due to the massive losses they suffered in short-term investment in securities following unexpected interest rate rises.
In contrast, 19 Korean banks posted a combined profit of $13.9 billion. The figures may satisfy critics of foreign financial institutions which are seen as profiting at the expense of the Korean economy.
Deals which went through in the aftermath of the 1997-1998 East Asian financial crisis are now under scrutiny. US private equity group Lone Star is now under investigation by South Korean prosecutors over allegations that its acquisition of a controlling stake in Korea Exchange Bank was bought below market value on the basis of falsified figures.