(20)

Other participants in the syndicated loan were also under pressure from the GOK to assist Hynix. In this respect, recital 55 of the definitive Regulation provides extensive information regarding the extent to which the GOK put pressure on Korea First Bank (KFB) to provide ongoing financing to Hynix. In a high-level economic ministerial meeting in November 2000 the GOK took steps to ‘alleviate Hynix's cash crunch’ and waived statutory credit limits for KFB, KEB and KDB. The Panel did not examine the evidence in relation to KFB, because the Commission concluded its involvement to be negligible. However, given that the Panel found that the same GOK tactics employed in relation to KEB amounted to direction and that the GOK owns 49 % of KFB, it is reasonable to conclude that the GOK was in a position to and did exert influence over KFB in relation to its decision to participate in the syndicated loan. KDB is a public body and KEB was found by the Panel to have been directed by the GOK. The participation of these banks in the syndicated loan is thus not a reliable commercial benchmark. Other banks that were part of the syndicated loan were also subject to similar pressure from the GOK. The GOK put very direct pressure on both Shinhan and KorAm banks regarding the extension of the export credit arrangements, which was made at the same time as the syndicated loan. These banks had concluded that they were already over-exposed to Hynix and reversed their earlier decision to increase the export credit ceiling available to Hynix. In response, an FSS official criticised their move as ‘unthinkable’ ( 18 ). The GOK held 18,3 % of Shinhan and was its largest shareholder, thus able to exert considerable influence over the bank. It is clear that Shinhan was not acting commercially given that it increased its loan loss reserves for Hynix even as it continued to assist the company and that it offered no legitimate credit risk analysis for assisting it. KorAM Bank again faced GOK threats when the bank refused to purchase Hynix CBs, because it decided that doing so was not financially sound. In response to the bank's decision not to purchase the bonds, an FSS official rebuked KorAm, using language uncharacteristic of a government apparently uninvolved in credit decisions. The official stated: ‘If KorAm does not honour the agreement, we will not forgive the bank’ ( 19 ). He further stated that the FSS would take stern measures against the bank, such as disapproving new financial instruments and subjecting the bank to a tighter audit ( 20 ). As a result of these threats, KorAm Bank capitulated and reversed its decision ( 21 ), while at the same time increasing its loan loss reserves for Hynix and offering no legitimate credit analysis for providing such financial assistance. Of the remaining banks which participated in the syndicated loan, Chohung Bank, Woori Bank, the NACF, Seoul Bank, Kwangju Bank, Peace Bank, Kyongnam Bank and the Industrial Bank of Korea are all GOK-owned and thus their credit decisions are tainted by GOK policy. The Housing and Commercial Bank, of which the GOK has a 20 % share, admitted government direction in its credit decisions in a sworn statement to the US SEC ( 22 ). Finally, although Pusan Bank had no GOK ownership, it was nevertheless ordered by the FSS in 1999 to fire or replace its executives and to increase its paid-in capital by USD 86,2 million before the end of March 2000 ( 23 ), to ‘slash their manpower, the number of branches and organisations, while disposing of ailing subsidiaries’ ( 24 ) and, in 2000, the FSS sanctioned its former and current officials for mismanagement ( 25 ). Given this degree of GOK control over Pusan Bank, the bank's decision to participate in the syndicated loan cannot be considered to be a safe commercial benchmark.