Back To Top

FSC chief under pressure to resign

FSC Chairman Kim Seok-dong
FSC Chairman Kim Seok-dong
Light action on Lone Star expected to invite series of protests


Financial Services Commission Chairman Kim Seok-dong will likely be under heavier pressure to resign following regulators’ allegedly lukewarm action against Lone Star Funds last Friday.

A group of lawmakers are poised to call for Kim to quit as the top regulator, criticizing the FSC for not taking stern measures on the U.S.-based equity fund.

A group of unionized workers in the financial sector had already said Kim should leave the post. They had continued to argue that the incumbent chairman is not an appropriate figure to take a reasonable action on Lone Star, citing his significant role as then-director general when the FSC endorsed the fund’s acquisition of KEB in 2003.

Now aside from the union, lawmakers of the National Policy Committee of the National Assembly are pushing ahead with early resignation of Kim.

There is a speculation that some lawmakers of the ruling Grand National Party asked the presidential office to replace Kim with other figure for the chief regulator post.

Opposition lawmakers are also reportedly moving to urge Kim to step down voluntarily. They, including those from the Democratic Party, mull over parliamentary investigation into the FSC.

The union of Korea Exchange Bank, whose majority shareholder is Lone Star, is considering filing an injunction with the Constitutional Court to suspend effectiveness of the FSC’s Friday decision.

Despite growing calls for punitive action against Lone Star from a variety of sectors, the FSC paved the way for the fund to take huge premiums from selling its stake in KEB by selecting an acquirer like Hana Financial Group striving to take over the bank.

The FSC’s nine-member panel ordered it to sell most of its KEB shares to any investor within six months.

Under the decision, the fund is entitled to select an acquirer and enjoy management premiums totaling at least 1 trillion won ($877 billion) from its coming stake disposal ― despite an Oct. 6 ruling that Lone Star rigged stocks of KEB’s credit card affiliate.

Many lawmakers, professors and lawyers had demanded that the regulator order Lone Star to sell KEB shares to anonymous investors on the stock market and ban the fund from selecting a particular acquirer.

Further, the FSC glossed over the social demand to probe Lone Star’s shareholder eligibility ― whether it is a non-financial or financial investor ― before ordering the stake sale for only the stock-rigging case.

If the fund is found to have been a non-financial investor, Lone Star’s acquisition of KEB in 2003 could be invalidated under the nation’s banking laws.

The FSC was ordered by courts in January and September 2009 to publicize the documents which it has been examining to determine Lone Star’s eligibility for KEB control since 2007.

But it rejected the order and appealed with the Supreme Court, which is reportedly scheduled to deliver a verdict on Nov. 24.

A firm is categorized as a non-financial investor when its non-financial assets exceed 2 trillion won or its holdings of non-financial concerns account for at least 25 percent of its total capital.

The FSC began the review in 2007 after civic groups raised the possibility that the U.S. private equity fund was not a financial investor.

But the regulator has yet to make a final ruling on the issue, inviting a barrage of criticism that it is dragging its feet for fear that it may be held accountable for its dubious approval in 2003 of the Lone Star’s acquisition of KEB.

Lawmakers and activists have criticized the FSC for neglecting its duty.

“It only looks into documents which were submitted by Lone Star’s attorney firm Kim & Chang and whose credibility is questionable,” a lawmaker said.

By Kim Yon-se (kys@heraldcorp.com)
MOST POPULAR
LATEST NEWS
leadersclub
subscribe