FSC Head to Support Lone Star’s Sale of KEB

Financial Services Commission (FSC) Chairman Jun Kwang-woo said he’s trying to find measures to break the recent deadlock in sale of Korea Exchange Bank (KEB), as soon as possible. His stance is different from the established policy of the government, which has argued that it would not approve Lone Star’s sale of KEB unless legal uncertainties were removed.”

Jun held a press conference at the FSC building in southern Seoul yesterday. “The delay of sale of KEB has sent negative signals to international investors and hampered the development of Korea’s financial market.”

The head of the FSC added, “The previous administration had been passive in dealing with the issue and argued that it would not allow Lone Star’s sale of the bank unless uncertainties were resolved. However, President Lee Myung-bak’s administration is struggling to find measures to address the issue.” But, he stressed, “Time is needed to resolve the issue. The FSC will make its own efforts but cannot deal with all the relevant matters. Legal decisions are being handled by the prosecution and the court.”

Lone Star, the biggest shareholder of KEB, agreed with the HSBC to sell its KEB shares to the British bank back in September 2007. However, the government has not allowed Lone Star to sell its shares since the court has not made its decision over suspicions that Lone Star acquired KEB at a giveaway price in 2003.

Experts forecast that the government will either urge the court to finish the trial as early as possible or allow Lone Star’s sale of its KEB shares.

Regarding the reappointment of state-run financial institutions, Jun said, “We’ll find new financial heads as soon as possible while considering candidates’ management capability, expertise, and political stance. We will not only give government officials a chance but also talented people in the private sector.”

Jun also said that the government would release detailed measures to privatize state-owned Korea Development Bank (KDB) in mid-April or early May. He added, “Before initial public offering, we need to consider measures to encourage global investment banks to buy KDB shares so as to raise the bank’s value.”

Jun said the Bank of Korea needed to raise interest rate, saying, “Drastic economic recession is like bleeding while price increase is like surging blood pressure. I think it’s more urgent to stop the bleeding.”

jarrett@donga.com larosa@donga.com