KDB chairman under increased pressure following failed deals
Korea Development Bank (KDB) Chairman Lee Dong-gull speaks during a press conference at KDB's headquarters in Yeouido, Seoul in January. Yonhap
By Yi Whan-woo
Korea Development Bank (KDB) Chairman Lee Dong-gull appears to be pushed further into the corner following a series of botched business deals that could possibly be used as an excuse by the incoming Yoon Suk-yeol administration to sack him.
The state-run bank failed last week in its plan to sell subsidiary KDB Life to JC Partners after the private equity firm was found to fall short of meeting conditions for the takeover.
The private equity firm has been the controlling shareholder of MG Non-Life, which was classified as an insolvent financial institution by financial authorities, April 19. The law bans a controlling shareholder of an insolvent financial institution from acquiring a new business.
The collapsed sale of KDB Life adds to two unsuccessful deals for KDB ― Daewoo Shipbuilding and Marine Engineering (DSME) in January and SsangYong Motor in March.
DSME, SsangYong Motor and KDB Life are all under KDB's control after becoming heavily indebted, while the state-run lender injected trillions of won in taxpayers' money over the years.
Additionally, KDB is the main creditor of Asiana Airlines, whose planned acquisition by bigger rival Korean Air has dragged on for years.
Against this backdrop, the management capabilities of KDB is being called into question.
Accordingly, critics are holding Lee responsible for mismanaging the state-run lender and are calling for its restructuring, with its relocation to Busan being brought up as a possible measures.
“Large-scale M&A cases involving DSME, SsangYong Motor and KDB Life have failed repeatedly under KDB,” said Rep. Yun Chang-hyun of the main opposition People Power Party (PPP) during a discussion he hosted on April 20.
The discussion dealt with problems associated with financing by state-run financial institutions, including KDB, and ways to resolve such problems.
The PPP lawmaker noted the recovery rate of the money injected by KDB is merely in the range of 20 to 30 percent, saying, “Such a low rate is drawing public criticism that KDB is increasing the financial burden on the government rather than reducing it.”
Park Chang-gyun, a Korea Capital Market Institute researcher who joined the discussion, cited the need to overhaul KDB's functions.
He suggested having KDB focus on corporate restructuring while handing over financial support for small- and medium-sized enterprises (SMEs) and commercial financing to other financial entities
The possible privatization of KDB was also brought up, after such an idea was raised during the 2008-2013 Lee Myung-bak administration.
“KDB may undergo structural changes, whether it is relocation to Busan or privatization under the new government,” a finance industry source said.
A loyalist of outgoing President Moon Jae-in, Lee has been against President-elect Yoon's pledge to move KDB's headquarters from Seoul to Busan, calling it, “a plan to regress, not progress.”
Although not intended, Lee also found himself as the target of Yoon's transition committee when DSME appointed a new CEO in late March.
The dispute was extended from rows between the outgoing and incoming governments, as KDB has been DSME's main creditor while the new CEO turned out be a longtime friend of the president.
Lee is serving his second three-year term since September 2020, after being appointed by Moon in 2017.