Government and Kookmin Bank Clash over LG Card Bailout

Conflicts between the government and Kookmin Bank over the LG Card Co. rescue plan were exacerbated.

Both sides failed to agree on a detailed joint takeover package under which the Korea Development Bank and some creditor banks will take control of LG Card Co.

“I don’t agree with the government’s assertion that LG Card crisis is a financial system risk. And if that is the case, the government should take responsibility,” said Kim Jung-tae, CEO of Kookmin Bank, to reporters at the new year’s meeting of the financial sector on Tuesday.

He also blamed LG Group for not taking the responsibility for its management failure.

Deputy Prime Minister and Finance Minister Kim Jin-pyo warned Kookmin Bank in response that creditors should not seek their own interests in resolving the LG Card Co. issue. Chairman Lee Jung-jae of the Financial Supervisory Commission made a similar statement.

Meanwhile some creditors criticized that only the burden of Kookmin Bank and the National Agricultural Cooperative Federation will be reduced in the additional rescue plan.

CEO Kim, however, made it clear that he didn’t want the collapse of LG Card Co., hinting at a possible last minute deal.

Kookmin proposed that KDB assume a 33 percent stake in the troubled company. “But in that case, KDB will face many difficulties such as preparing consolidated financial statements under GAAP,” said the KDB and the government. “KDB’s stake limit in LG Card Co. is not restricted to 23 percent, but we can’t confirm how much the stake would increase,” said Byeon Yang-ho, director-general of Financial Policy Bureau at the Ministry of Finance and Economy.