FSC says Hana boss acted aloneKim Jong-yeul’s announcement on Wednesday that he will step down as the president of Hana Financial Group has raised concerns that he may have succumbed to government pressure as well as speculation about what impact the move will have on the group’s acquisition of Korea Exchange Bank.
However, financial regulators were quick to deny any government involvement in his resignation after rumors to this effect began spreading like wildfire.
“Only Hana Financial Group knows the [true] reason [behind Kim’s resignation], and it is an issue that only it should address,” said Kim Seok-dong, chairman of the Financial Services Commission (FSC), in a meeting with reporters yesterday.
The issue of who holds the group’s presidency has no bearing on the watchdog’s still-pending approval of the KEB deal, said another FSC official.
“The KEB acquisition needs to be resolved quickly, but as I understand it there are no plans to discuss the matter at our next regular meeting [later this month],” he said.
The deal has become a delicate issue since KEB was bought by the U.S. buyout firm Lone Star several years ago. The government has taken considerable flak from the public and main opposition party for selling a Korean bank to a foreign buyer at a lower-than-market value, a move critics say only succeeded in fattening the pockets of a foreign investor and channeling wealth out of the country.
One of the stumbling blocks to the sale is that the FSC can approve Hana’s acquisition of KEB when Lone Star is identified as a financial capital. Under Korean law, no company with more than 25 percent of its capital tied up in non-financial companies is permitted to hold more than a 4 percent stake in a domestic bank. Equally, those with assets of 2 trillion won ($1.7 billion) or more in non-financial firms are also barred.
When Lone Star bought the bank in 2003, the government allowed the takeover after determining that the U.S. fund had only invested 21.3 percent of its capital in non-financial firms.
As the financial regulator is taking its time before making a final decision on the case, Hana has shown signs of frustration at the delay. The group is facing a tight deadline to wrap things up as its provisional contract with Lone Star expires at the end of February.
The watchdog was originally scheduled to make an announcement on the matter on Dec. 28, but it postponed doing so, citing political complications.
With time an issue, Hana Group Chairman Kim Seung-yu has been urging the FSC to speed up its approval of the deal since the beginning of the year, stressing that the contract could be annulled if the deadline is missed.
“Would Lone Star want to renew the contract after the end of February?” Kim asked rhetorically last week.
Meanwhile, speculation is mounting that Kim Jong-yeul, who was the likeliest candidate to succeed the chairman due to their 30-year relationship, has sacrificed himself to put additional pressure on the government. He said he was resigning to smooth the way for the takeover and enable the two financial entities to integrate more easily.
By Lee Ho-jeong [firstname.lastname@example.org]
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