South Korea regulator bars KDB from Woori bidding

FSC takes note of financial investors’ concern that the formation of a giant state bank could reverse competitiveness of South Korea’s banking sector.

Seoul’s regulators will not allow state-run Korea Development Bank to bid for the government’s $6bn controlling stake in Woori Financial Group, the country’s biggest lender, because of a lack of public support.

The regulators’ decision ends speculation that KDB, viewed as the frontrunner in the deal, could acquire Woori in order to form a state “megabank”. Several prominent South Korean policymakers have suggested Seoul should forge a heavyweight domestic lender to support industrial conglomerates such as Samsung, Hyundai and LG.

However, Kim Seok-dong, chairman of the Financial Services Commission, said on Monday such an acquisition would be unwise.

“We have ruled it desirable that KDB not bid for Woori owing to a lack of public consensus,” he told lawmakers.
South Korea’s parliamentarians, Woori’s union and the national press have criticised a potential KDB-Woori tie-up.

The critics have argued that Lee Myung-bak, South Korea’s president, is using his friend and former finance minister, Kang Man-soo, who is now chairman of KDB, to push through the creation of a megabank.

As an industrial lender, KDB had some natural synergies for merging with Woori, which has a far greater high-street presence. But financial investors have also complained the formation of a giant state bank could reverse South Korea’s commitment to make its banking sector more competitive.

View the full story in Financial Times.