Financial Services Commission Chairman Kim Seok-dong pledged Thursday to toughen punishment on trading irregularities in the financial industry one day after the government partly suspended Deutsche Bank’s local unit for stock manipulation.

Concerning the speculation that Deutsche Bank may pull its investments out of the Korean market, he told reporters, “I don’t care about that (on whether or not the company will leave this country).”

“The sort of stern action against rule-violators will rather be an opportunity for the local financial market to gain confidence among foreign investors,” he said.

Asked about the background to the FSC slightly lightened its sanction on Deutsche Bank, he said the regulator was taking possible legal disputes into consideration.

While the Financial Supervisory Service had proposed to the FSC that regulators file a complaint against the bank’s headquarters with the prosecution, the final decision-maker FSC only referred the case to the prosecution.

Instead, the FSC filed a complaint against the bank’s brokerage unit in Korea as well as the bank’s staffers in Seoul, Hong Kong and New York.

Deutsche Bank said in a statement that it will hold an independent review of systems and controls at its Asian Equities Absolute Strategies Group.

It also said the sanctions against the staffers were very regrettable.

Regarding the issue whether Lone Star had been eligible to become the largest shareholder of Korea Exchange Bank, Kim said he instructed the FSS to review it.

He said regulators will finalize the issue “in accordance with laws,” adding it will not take a long time for the FSC will make public the result.

While Hana Financial Group has applied for a regulatory endorsement about its planned takeover of KEB, chairman Kim predicted the date of announcing whether or not to approve the deal and that of announcing Lone Star’s eligibility would be similar.

But he declined to mention the reason why former FSC chairmen continued to drag their feet in reviewing the issue for several years.

Generally, assessment procedures as to whether a majority shareholder is a financial investor or non-financial investor take a few months at most.

Under local banking laws, non-financial investors are banned from holding more than a 9 percent stake in a Korean bank.

When Lone Star acquired KEB, the ceiling had been at 4 percent. The U.S. fund, however, has held more than 50 percent of the KEB shares.

By Kim Yon-se (kys@heraldcorp.com)