SEOUL Some 15,000 staff of South Korea's two key banks Monday continued a sit-in protest against a planned merger, despite government threats to disperse them on the fourth day of their strike, AFP reported.

The workers from Kookmin Bank and Housing and Commercial Bank (HCB) had a snowy and chilly Christmas, holed up in tents on a hillside compound at Kookmin's financial education center in Ilsan, north of Seoul.

The makeshift dwellings made the site look like a huge refugee camp.

The protestors went on strike Friday when the presidents of the two major banks announced the merger, believing it would lead to massive job cuts.

The government, fearing the strike may be prolonged and further paralyze the country's banking system, issued a fresh warning against union members whom it said were engaging in "illegal" labor actions.

"We decided to deal sternly with the unions' illegal acts," Financial Supervisory Commission Head Lee Keun-Young said after an emergency meeting with the ministers of labor, justice and finance-economy.

Sources close to the meeting said the cabinet ministers seriously discussed sending in police to disperse the protestors.

Around 3,000 riot police blocked off the compound, urging the workers to end their protest and threatening to break into the sit-in site.

But Kookmin and HCB union leaders said the protest will continue at the center until Thursday, reinforcing some 400 workers armed with clubs and rocks to ward off a possible police move to disband the rally.

The leaders added that if police forced them to leave the site, they would move to another place to continue the strike.

"Our struggle will continue until the proposed forced merger is scrapped and the presidents of both banks resign," the Korea Financial Industry Union (KFIU), an umbrella group of bank unions, said in a statement.

KFIU has strongly urged unions at other banks to join the labor strike from Thursday to intensify the industrial action.

The labor action has paralyzed operations at more than 1,200 Kookmin and HCB offices nationwide, with most tellers' counters empty.

The financial watchdog has told Kookmin and HCB to keep automated teller machines working to full capacity, but many have already run out of money.

Monday's cabinet meeting also decided temporarily to reduce the number of Kookmin and HCB offices to remain open from Tuesday. Hundreds of workers from other banks, meanwhile, will be sent to help run the strike-hit offices.

The presidents of Kookmin and HCB have also ordered striking staff to return to work on Tuesday or face punishment.

The bank heads, vowing to push for the merger, warned defiant staff would risk suspension, pay cuts or even job losses.

But another 1,000 senior Kookmin workers, mostly team directors who had remained aloof from the strike, joined the sit-in protest Sunday.

Kookmin and HCB, which are relatively healthy, agreed on Friday to merge into a 127-billion-dollar "super bank," a move backed by the government which is seeking to consolidate the debt-weakened banking sector.

Kookmin's President Kim Sang-Hoon expected the merged entity to be the country's largest, with 122.2 trillion won (100 billion dollars) in combined customer deposits, 19,888 employees and 1,149 branches.