Financial authorities on Tuesday unveiled the vision to strengthen the state-policy financing by merging the state-controlled KDB Financial Group and the Korea Finance Corp. by July 2014.
The separate functions of KDB Financial and the KoFC are scheduled to be re-integrated five years after the latter spun off from the financial group in 2009, according to the Financial Services Commission.
The merge, in which KDB is to re-absorb the KoFC, should go through lawmakers’ approval procedures during the plenary session of the National Assembly later this year.
The spinoff was as an intermediate step ― under former President Lee Myung-bak and former KDB chairman Kang Man-soo, Lee’s close confidant ― of the past policymakers’ earlier attempt to privatize the group and its flagship Korea Development Bank.
While KDB Financial will absorb KoFC’s domestic function of project financing for small and mid-sized enterprises, the Export-Import Bank is to acquire its overseas function, said regulatory officials at the FSC.
The coming road map means that the incumbent government and financial authorities have completely scrapped the sale plan for KDB Financial.
The FSC also plans to instruct KDB Financial to suspend its move to sell KDB Daewoo Securities, the nation’s No. 1 stock brokerage house, for a certain period.
Though the financial group had pushed for the resale of the securities unit in a bid to retrieve taxpayers’ money, financial authorities have decided to prioritize its ongoing project to privatize Woori Financial Group involving Woori Investment & Securities for the time being.
However, irrespective of the scrapped plan for KDB Financial’s privatization, several of the group’s nonbanking units such as life insurance and asset management sectors could be put up for auction under the government’s policy to secure more state funds.
In addition, Eximbank will be in charge of the greater part of funding to Korean SMEs or venture start-ups advancing to the emerging overseas market.
“As the government is also considering selling some of its dominant stake in the Industrial Bank of Korea, one of the four major state-policy financial firms with KDB, Eximbank and KoFC, the two ― KDB and Exim ― are likely to take on a big brother role over the next few years,” said an executive at a commercial bank.
Over the past few months, some KoFC officials have strongly protested policymakers’ move to merge the two entities.
By Kim Yon-se (email@example.com