Gov`t to revise regulation to privatize state-run `mega bank`

To expedite the privatization of Woori Financial Group, the government will allow financial holding companies to control other state-owned financial groups if the former owns at least half of the latter.

The cap is set at more than 95 percent.

In addition, the government will sell the state-controlled Woori in a package deal instead of spinning off its subsidiaries, such as Woori Investment & Securities, Kyongnam Bank and Kwangju Bank. An investor seeking to buy the Woori group, however, has to buy at least 30 percent of the group’s shares.

This will help the state-run KDB Financial Group take over Woori, and thus the plan to privatize the nation’s largest financial group will likely fall apart. If KDB Financial acquires Woori Financial, a gigantic state-owned financial entity will emerge.

So criticism will likely arise as the government`s decision goes against the purpose of Woori’s privatization, which is to retrieve government funds.

Min Sang-ki, head of the Public Fund Oversight Committee, announced the plan Tuesday. The committee will make a public announcement on the sale Wednesday, receive letters of intent to bid for Woori Financial by June 29, and choose a preferred bidder in September.

“The Public Fund Oversight Committee and an organizer of the sale said investors are reluctant to take over Woori because of a law that requires them to buy more than 95 percent of shares of the financial group,” he said.

Financial Service Commission Vice Chairman Shin Je-yoon said, “The law will be revised if necessary," adding, “We will decide the revision after listening to opinions from various circles under certain principles.”

Many at the financial regulator said a new regulation is needed to reduce the limit from 95 percent to 50 percent. Without the revision, an investor must buy the remaining 65 percent of Woori group`s shares even if the former has purchased 30 percent of the shares out of the 56.97-percent stake held by the government.

KDB Financial said, “We will decide whether to join the bid after consultations with financial authorities.”

Given that Kang Man-soo, an advocate of mega banks who was named chairman of KDB Financial on March 14, is actively pursuing the takeover of Woori, KDB will likely to join the bidding race.

cha@donga.com