The Government Looks on the Breaching against Bank Regulation

It is known that the major shareholder of the First Bank, New Bridge Capital, an US investment fund, possesses the shares through its two paper companies at least. So it raises suspect on its background.

It is also known that New Bridge capital did not report on the change of shareholders, so it breached the phase of the obligation of report on the change of major shareholders in Bank regulation.

The government did not recognize this fact, so it becomes the subject to be criticized about negligent supervision on the First Bank used 17 trillion won of public fund.

According to the confirmation by Dong-A Ilbo at 29th, New Bridge possesses the shares of the First Bank by paper company ‘KFB Cayman Holding Company’ based on Cayman Islands and ‘KFB New Bridge Holding Company’ based on Malaysia.

A financial expert analyzed “It is suspected to conceal major shareholder.”

Ahan Hyung-do, Researcher of KIEP spoke “To investigate the fund sources, at least financial authorities in 4 countries should cooperate and there are many complicate procedures.”

Recently, it was known that Soft Bank, a Japanese investment company, is a one of major shareholders of the First Bank. At 17th, a Japanese newspaper reported “Soft Bank made 17 billion yen by selling the shares of the First Bank.”

So, the stock option the First Bank offered to Jonathan Epstein of ex CEO of Soft Bank at March of 2000 is illegal. Stock Transaction Regulation prohibits offering sock option to major shareholders or individual has special relationship with them. It was case breaching domestic regulation by abuse of unidentified shareholders of the First Bank.

So it is indicated that the government decided to sell the First Bank to unidentified fund having no experience of bank management and was negligent to supervise.

Since 1997, 17 trillion won of public fund was injected into the First Bank (5 trillion won after sold) and 1 trillion will be injected further to recover insincere management.

At the moment, the First Bank is a ‘mini bank’ with the total asset of 27.5 trillion won. Foreign asset of 4.2 billion dollars at the time of sold becomes only 1.58 billion dollars at the end of June.

ykim@donga.com