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Korean financial authorities and Korea Exchange Bank are busy blaming each other over allegations that KEB was inaccurately classified as ailing in 2003 to permit its sale to the offshore investment firm Lone Star. The Financial Supervisory Service, Financial Supervisory Commission and Finance Ministry and Korea Exchange Bank all point the finger at each other for artificially lowering the bank¡¯s BIS capital adequacy ratio ahead of the sale.
FSS Vice Governor Kim Jung-hoe on Tuesday told reporters a five-page fax with the allegedly underplayed figures was prepared at the request of an FSC official. ¡°The official who made the report did not know that the BIS ratio reported in the fax would be used to justify the sale of KEB to Lone Star,¡± Kim added.
But Deputy Finance Minister Kim Seok-dong, then an FSC director, said the FSC has nothing to do with calculating BIS ratios. ¡°Since calculating BIS ratio requires special knowledge, we have to respect the opinion of the FSS, which is in charge of reviewing it.¡± However, others in the Finance Ministry, which was involved in the sale of KEB, also finger the FSC. The then financial policy director, Byeon Yang-ho, said the ministry sent the commission an official letter at the request of the FSC itself asking it to consider lifting restrictions on the amount of shares Lone Star was permitted to hold.
Meanwhile, the FSS is looking for ways to prevent Lone Star from selling KEB, which is expected to net the investment firm profits of W4.25 trillion (US$4.25 billion). Vice Governor Kim said he told staff to review the planned sale after prosecutors found evidence of irregularities in Lone Star¡¯s original acquisition of KEB. The KEB trade union also filed a petition with the Seoul Central District Court asking it to halt the sale, for which Kookmin Bank is the preferred bidder.
(englishnews@chosun.com )
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