FSC head says all options open for Woori sale
He made a similar remark when asked about the establishment of Korea’s first mega-bank.
“It isn’t the right time yet [to talk about KB Financial acquiring Woori Financial],” Shin said after presenting the keynote speech at the 2013 Korea Economic Forum hosted by the Korea JoongAng Daily at the Millennium Seoul Hilton in central Seoul.
More than 100 foreign diplomats, chief executives and financial institution executives attended the forum to hear the top financial regulator talk about the Park Geun-hye government’s financial policies.
One of the administration’s top priorities is the privatization of Woori by selling the government’s 57 percent share.
When asked if selling Woori to KB Financial would create a mega-bank capable of competing with other global banks, Shin did not give a direct answer but said, “Room is open for many options.”
The government of Lee Myung-bak failed to sell Woori despite three attempts. The Park administration wants the privatization to be done as soon as possible to recoup as much public investment as possible and to contribute to the development of Korea’s financial industry. In 2001, the government invested a 12.8 trillion won ($11.3 billion) lifeline to save Woori Financial from going bankrupt in the wake of the 1997 Asian financial crisis.
In the three attempts by the former administration, KB Financial showed interest in the final one but pulled out at the last minute.
Speculation is growing anew that KB Financial has its sights on Woori despite concerns that the resulting mega-bank would be bigger in terms of assets but that synergies between the two banks would be minimal.
Both KB Financial and Woori Financial are focused on similar businesses in the banking sector and are not as involved in nonbanking sector businesses like securities and insurance.
During a Q&A session following his keynote speech, Shin said the FSC’s public fund oversight committee is considering “how to make this deal [go] smoothly.” The FSC is expected to announce details on the Woori Financial Group sale no later than the end of next month.
When asked about whether the government would split Woori Financial into smaller chunks to successfully sell it off, Shin said, “We are open to all alternatives.
“It will be different from the previous one [government plan],” he said. “But it’s not fixed yet.”
He left room open for foreign investors to buy Woori Financial.
“Some principles are very clear,” Shin said. “Equal opportunity [will be given] to foreign investors and domestic investors if it is not against regulations or the law.”
Earlier, Shin addressed the financial policy direction of the new Park government. He said he had learned about financial policies through his career by going through a series of financial crises, including the 1997 Asian financial crisis, the 2003 credit card bubble in Korea, the 2008 global financial crisis and the recent European fiscal crisis.
Referring to Shin’s remarks in his speech about Korea’s previous experience with sudden capital reversals, one questioner asked about the risk of capital outflows.
The top financial regulator said Korea has different kinds of defense.
“As for regional defense, we have the CMIM [Chiang Mai Initiative Multilateralisation] agreement, currency swaps with China and some other global safety nets,” he said. “But the more important thing is how to maintain our sound economic system. We will monitor the foreign exchange market very closely, and we’ll take action if needed.”
Shin was also asked by a foreign diplomat about the government’s efforts to create a better environment for small and medium enterprises.
“How to make some [self-employed business people] restart, to join an industry again [after they fail] - that’s not an easy one,” he said. “In financial matters, we will eliminate the financial burden of a joint liability practice.”
Shin added that the joint liability practice will be eliminated in the nonbanking sector that includes insurance and card companies following the elimination of the system in the banking sector last year. Many people in Korea have been kept down economically after guaranteeing another person’s liability for loans.
Shin also shared his thoughts on the widely expected reforms in public financial institutions, saying that there should be coordination so that roles of policy financial institutions such as the Export-Import Bank of Korea, the Korea Development Bank and the Korea Finance Corporation do not overlap with each other. “How to coordinate these roles is a challenge,” he said.
By Lee Eun-joo [firstname.lastname@example.org]
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