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The Board of Audit and Inspection reportedly said on Wednesday that it found the debts of Korea Exchange Bank at the time of its sale to U.S. investment fund Lone Star in 2003 were exaggerated by at least W350 billion (US$350 million) through overlapping or excessive calculations. A debt of some W350 billion can reduce the BIS capital adequacy ratio by more than one percentage point.
A final confirmation of the findings by the board would officially mean that financial authorities and the KEB did in fact manipulate the size of the bank¡¯s debts and its BIS ratio to facilitate its sale.
¡°We found that tens of billions of won worth of debts were calculated at twice their real value while we were looking into how the KEB calculated its BIS ratio at 6.16 percent, and this is something that former KEB governor Lee Kang-won has admitted,¡± Board member Chung Chang-young said.
The Board, through its own investigation, reportedly estimated KEB¡¯s BIS ratio at the time to be around 8 percent. According to relevant financial supervisory laws, financial institutions are classified as insolvent if the ratio drops below that level.
Meanwhile, an investigation being conducted by prosecutors and the audit board into the KEB sale in 2003 is likely to delay an on-the-spot survey of KEB by Kookmin Bank, which was chosen as the preferred bidder for a planned takeover of KEB.
Kookmin Bank's Vice President Kim Ki-hong has told reporters that the bank will decide its position after the probe wraps up. KB is reviewing its legal status and position as the preferred bidder and what measures it should adopt under various scenarios, with the worst-case scenario being the annulment of the 2003 sale.
(englishnews@chosun.com )
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