By Na Jeong-ju Staff Reporter The Financial Supervisory Commission (FSC) said Tuesday it will carry out a ``thorough'' screening on the eligibility of a new owner of the Korea Exchange Bank (KEB) if its current owner Lone Star Funds sells its controlling stake in the country's fifth largest lender. This is viewed as an indication that the regulator won't endorse Lone Star's KEB sale before a court ruling is issued on the legality of the fund's acquisition of the bank in late 2003. Lone Star Funds Chairman John Grayken has said he was looking for a strategic investor who can take over the KEB, and that the sale can be complete before the court ruling. ``If Lone Star wants to dispose of its majority stake in KEB, it should get approval from the FSC,'' Kwon Hyuk-se, head of the FSC's Financial Supervision Policy Bureau, told reporters. ``The eligibility of a new KEB owner will be checked thoroughly, so it will take time for Lone Star to complete the deal.'' The comments came after Lone Star, a U.S. private equity fund, sold a 13.6 percent stake in KEB for 1.19 trillion won in a block sale, and disposed of its stakes in Kukdong Engineering & Construction and Star Lease last week. Grayken told the Korean media that he is looking for an investor who can buy Lone Star's remaining 51.02 percent stake in KEB. Kookmin Bank, the country's largest lender, and Singapore's DBS Group Holdings have showed interest in buying KEB. The Korea Economic Daily reported on Tuesday that the National Pension Service (NPS) has started negotiations with Lone Star to acquire KEB. The NPS flatly denied the report, saying it is not considering participating in the deal. The Seoul Central District Court is currently reviewing Lone Star's alleged violation of the Securities Law in its purchase of KEB in 2003. Korean prosecutors earlier called its KEB purchase ``illegal.'' State auditors also concluded last year Lone Star was not eligible to buy KEB, but that South Korean regulators violated laws to approve its acquisition. Lone Star has denied it made any wrongdoing in the process of acquiring KEB. The National Tax Service (NTS) said Monday it will launch an audit soon to check whether Lone Star avoided any taxes from the sale of its assets in Korea. Lone Star, however, said Tuesday it made investments in Kukdong Engineering and Star Lease through its affiliates in Belgium, with which South Korea signed a treaty to avoid double taxation, so it is not obliged to pay taxes for the investment gains. Instead, Grayken said the fund is willing to donate a certain amount of that gain to society. jj@koreatimes.co.kr