The Korea Herald


Lone Star haunts FSC chief for 8 years

By 김연세

Published : April 27, 2011 - 19:04

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Ruling on Lone Star’s eligibility as KEB owner postponed

The Financial Services Commission decided to delay its ruling on the issue of Lone Star Funds’ eligibility as the majority shareholder of KEB.

The decision marks a shift from its earlier stance to rule on whether the U.S. fund was a financial investor in 2003 in its scheduled panel meeting Wednesday.

Though the issue has come into the spotlight again in the wake of Hana Financial Group’s plan to take over KEB, it is significant if the situation is traced in terms of FSC Chairman Kim Seok-dong’s personal history.

The issue of Lone Star includes the noticeable relation between Kim and the buyout fund controlling Korea Exchange Bank for eight years.

In 2003, Kim was one of the key figures in generating regulatory approval for Lone Star’s acquisition of KEB. He was serving as FSC director general in charge of the working-level endorsement process.

Kim was also one of the figures from Cheong Wa Dae, the finance ministry and KEB who participated in a behind-the-scenes meeting to discuss the M&A issue at a hotel in Seoul in July 2003.

Later, between 2004 and 2010, he mostly worked for the finance ministry. He was then appointed to the post of FSC chairman in January 2011.

When he came back to the regulatory body, the Lone Star issue was rekindled as Hana Financial applied for the KEB takeover endorsement in December 2010.

Leaders in the financial market say that Kim has been put in an awkward position amid ongoing protest of the KEB labor union calling Lone Star “speculative capital” and the situation under which a growing number of Koreans have been acquainted with dubious approval by the FSC.

“The financial authorities should have not handed over the bank to a fund,” a former high-ranking official of the FSC told The Korea Herald.

Commenting on the indestructible relationship between Kim and Lone Star, he said, “The kind of fund investors are not allowed to own a Korean bank unless there is law revision.”

Irrespective of a future revision, the former regulatory official said he is one of the opponents of sale of local financial company to funds like Lone Star.

An incumbent FSC official also said it seemed that “few FSC staffers believe Love Star is a financial investor” which could be entitled to own a Korean commercial bank.

The FSC’s next panel meetings for next month are scheduled to be held on May 4 and May 18.

By Kim Yon-se (