Feud brews between public banks

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Feud brews between public banks

Tension is growing between KDB Financial Group and the Export-Import Bank of Korea (Korea Eximbank) over dominance of the public financing sector.

When Lee Dong-geol was inaugurated as chairman of KDB Financial Group earlier this month, he made clear his intention to expand KDB’s business, putting him at odds with the second big state-run bank, Korea Eximbank.

Lee and Korea Eximbank CEO Lee Duk-hoon are both supporters of President Park Geun-hye, and they helped Park’s presidential campaign by mobilizing voters in the financial sector.

Tension spiked when the KDB chairman made a pledge to boost project financing for companies trying to win overseas projects. Project finance is a specialty of Korea Eximbank.

“Supporting companies to export infrastructure abroad through project financing is our role,” said an employee of Korea Eximbank. “If KDB enters this market, I am worried about excess competition between the two to win projects.”

The Financial Services Commission (FSC) made it clear in 2013 and 2015 that KDB’s role is to oversee corporate restructuring while Korea Eximbank’s role is to support Korean business orders abroad, according to employees of Korea Eximbank.

They suggest that KDB’s role be defined in a more specific manner that confines it to the arrangement of merger and acquisition deals and utilization of private equity funds, which is distinct from what Korea Eximbank does.

At a New Year’s press conference, Korea Eximbank CEO Lee said, “It seems to me KDB is looking down on Eximbank.”

On the other hand, KDB’s argument is that since the FSC decided to maintain KDB’s mission to support companies’ overseas businesses, boosting the project financing business is not a problem, according to a KDB official.

According to KDB, the institution’s project financing for public-private partnership projects was the world’s second largest in 2014.

“Lee’s remark was meant to signify increased competition with foreign financial institutions in the global market,” said another KDB official. “It never meant to take over Eximbank’s business.”

On the flip side, some people at KDB have complained that Korea Eximbank is encroaching on its core business area, corporate restructuring, since CEO Lee’s term began in 2014.

Korea Eximbank has gotten involved in the restructuring of Daewoo Shipbuilding & Marine Engineering, which is suffering 5 trillion won ($4 billion) in losses. Korea Eximbank is the company’s largest creditor. The bank launched a separate investigation into the shipbuilder’s losses by hiring an accounting firm on its own. KDB blames Eximbank for delaying normalization of operations of the country’s third-largest shipbuilder.

“That dealt a blow to KDB’s pride as a big brother in the public finance field,” a KDB employee said. “Eximbank’s lending to small businesses, which used to be KDB’s specialty, is also a problem.”


BY LEE TAE-KYUNG [song.suhyun@joongang.co.kr]

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