Back To Top

FSC, FSS to undergo six-week inspection by top audit agency

The Board of Audit and Inspection will launch an extraordinary inspection into the nation’s two financial regulators next Monday.

The top auditor has informed the Financial Services Commission and the Financial Supervisory Service of its scheduled probe for the coming six weeks, regulatory officials said Friday.

The officials said they do not rule out the possibility that the BAI may investigate the regulators’ ruling on Lone Star Funds, the biggest shareholder of Korea Exchange Bank.

“The scheduled audit is not a periodic but an extraordinary one,” an FSS official said.

“While auditors will conduct inquiries into a variety of sectors, there is a possibility that they will also look into the Lone Star issue,” he said.

Meanwhile, an FSC official downplayed the possibility that the BAI will embark on an intensive probe into the allegations involving the U.S.-based equity fund.

He predicted the audit will be focused on the overall supervisory systems and duties of the FSC and the FSS, an executive arm of the FSC.

After conducting a preliminary audit between Jan. 9-20, the BAI will carry out an intensive audit between Jan. 30 and Feb. 24.

Market observers are paying attention to the fact that the audit is an “extraordinary” one and the “timing” comes amid a significant phase under which Lone Star has been suspected of having been ineligible to own KEB.

Further, several lawmakers recently called for the BAI to audit the regulators for their allegedly negligent investigation on Lone Star.

A group of lawmakers and civic groups continued to argue that the regulators failed to uncover the allegations that Lone Star has been a non-financial investor, which is banned form controlling a local bank, over the past few years.

Amid the mounting criticism, the FSS said it has been reviewing the fund’s eligibility as to whether it is non-financial or financial one.

When the review is completed, the FSC will make public the regulators’ stance by holding a panel discussion composed of senior officials.

The panel discussion is slated for twice this month ― Jan. 11 and 27.

As FSC officials said the FSS has yet to notify the FSC of the result, there is only a slim possibility that their final position will be announced on Jan. 11.

Though the latter meeting was originally slated for Jan. 25, the FSC delayed it to Jan. 27 in consideration of the Lunar New Year holiday.

A director general of the FSC said he is uncertain that the position on Lone Star could be unveiled on Jan. 27.

The FSC has to finalize the issue on the fund’s shareholder eligibility before it can approves or rejects Hana Financial Group’s application to take over KEB from Lone Star.

The deadline for the regulatory decision on the M&A application is Feb. 29 and the preliminary deal between Hana Financial and Lone Star expires on the same day.

Lone Star has been entitled to drop out of the contract unilaterally from Jan. 1.

By Kim Yon-se (