Lawmakers mount calls for reactivation of plan to sell government-held stake
Financial authorities are expected to come up with a new plan soon to privatize state-owned Woori Financial Group as calls from politicians for resumption of the stalled sale plan are mounting, sources said Tuesday.
Last week, some members of the National Policy Committee of the National Assembly called for Korea Deposit Insurance Corp., the biggest shareholder of Woori Financial, to draw up a new plan to sell most of its stake in the group.
The lawmakers’ request comes as many analysts and bankers predict the stalled privatization project will not be resumed before the next administration is inaugurated in February 2013.
They called for the KDIC to report to the National Assembly measures to recoup taxpayers’ money by accelerating the sale of the group by the first quarter of 2012.
Financial authorities, including the Financial Services Commission and the Public Fund Oversight Committee, had to suspend the sale twice ― in the second half of 2010 and the first half of 2011 ― as they failed to attract competitive investors.
The bidding price, which was projected to be too high, was one of the major hurdles under current laws, according to analysts.
In the scenario that the government wants to sell Woori Financial to another big financial group, bidding may exceed 10 trillion won ($8.77 billion) as a merger between financial groups requires trading of at least a 95 percent stake.
Woori Financial, which comprises the flagship unit Woori Bank, is the nation’s biggest financial group by assets.
Analysts have forecast it would be difficult for major financial groups such as KB, Shinhan and Hana to raise funding as long as laws or enforcement ordinances are not revised.
Though the FSC had sought to revise the ordinances and lower the minimum stake level from 95 percent to 50 percent, some lawmakers reportedly blocked the move in the first half of 2011.
“The hurdle will continue unless some senior policymakers drop their ambition to launch a mega-bank in the nation though a block sale of Woori business units,” a banking research analyst said.
He also cited the government’s unwillingness to hand over Woori to non-Korean investors as another hurdle. It had promised to offer equal opportunity.
The KDIC took over Woori Finance in 1998 after injecting 12.8 trillion won in public funds to bail out Woori Bank.
As part of collecting public funds, the KDIC started trimming its stake at its initial public offering in 2002, and block sales between September 2004 and April 2010 reduced its stake to below 60 percent.
The planned sale is heating up a debate over the merit of giant banks, despite a global move to regulate investment banking in the wake of the financial crisis.
Some bankers say there is need for mega-sized financial services companies to nurture a globally competitive lender.
The privatization will also come with a separate deal for selling controlling stakes of 50 percent plus one share in the two regional banks, Kyongnam Bank and Kwangju Bank ― affiliates of Woori Bank.
Woori Investment and Securities could also be included in the privatization deal, as the government seeks to create a synergy with Woori’s banking sector.
By Kim Yon-se (firstname.lastname@example.org