Pension fund holds major stake in 4 financial groups


The National Pension Service has expand its presence financial industry after regulators paved the way for the fund to increase its stake in commercial banks earlier this year.

Experts are divided over the national pension fund’s active buying of shares in the financial sector.

The Financial Services Commission has ruled that the NPS is regarded as a financial capital which is entitled to hold up to 10 percent shares in banks without regulatory permission.

In a statement, the FSC said it decided to view the national pension fund as a finance industry-oriented capital rather than business industry-oriented (or non-financial) capital.

The national pension fund’s potential power in the financial market is drawing interest as it has become the biggest shareholder of three financial groups and the second-largest shareholder of a financial group.

This year, the NPS actively purchased banking shares on the Korea Exchange and became the largest shareholder of KB Financial, Shinhan Financial and Hana Financial.

For the state-run Woori Financial Group, the fund is the second-largest shareholder following the Korea Deposit Insurance Corp.

The possibility is growing that the fund will play a significant part in shareholder meetings of the nation’s four major financial groups.

The optimistic view involves the expectation that the NPS will play a role as a “white knight” against possible hostile takeover attempts by speculative investors for Korean banks.

“Its power will prevent the domestic financial industry from being damaged by foreign capital,” a senior researcher at the Korea Institute of Finance said.

His remarks reflect past cases in which three Korean banks, Korea Exchange Bank, Korea First Bank and KorAm Bank, were handed over to three U.S.-based buyout funds ― Lone Star, Newbridge Capital and Carlyle ― respectively.

On the contrary, critics forecast the NPS’ growing presence will ultimately invite frequent intervention of the government in the commercial banking sector.

This type of intervention may include twisting arms at banks to bail out smaller ailing financial companies and appointing bank CEOs who have worked for government agencies.

The NPS is the world’s fourth-largest pension fund with assets of more than 300 trillion won ($254 billion).

In addition, the national pension fund has increased its stake in the business sector to become a main shareholder of big enterprises such as Samsung Electronics and Hyundai Motor.

It currently holds more than 5 percent of shares in about 140 companies listed on the Korean bourse.

Though the NPS has been passive when it comes to management decisions of financial companies and conglomerates, it could actively exercise voting rights in the future under willingness of policymakers.

In the first half, Kwak Seung-jun, chairman of the Presidential Council for Future and Vision, said the NPS would start exercising its shareholder rights more actively during the fourth quarter.

The presidential aide said big businesses have become too powerful in Korea. Then he stressed the need to counterbalance their political as well as economic power.

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