Watchdog set to approve Hana’s takeover of KEB next month

Korea's financial watchdog is likely to give the final green light next month to Hana Financial Group to buy Korea Exchange Bank (KEB), wrapping up the long-pending deal, sources said Sunday.

Financial regulators are nearing the conclusion that there are no problems with Hana Financial's purchase of country's fifth-largest lender from the U.S. buyout firm Lone Star Fund regardless of Lone Star's eligibility issue, they said.

Currently, the Financial Supervisory Service (FSS), the executive body of the nation's financial regulator Financial Services Commission (FSC), is reviewing Lone Star's eligibility as KEB's major shareholder.

"We have finished reviewing the classification of Lone Star as a possible industrial player and we plan to report to the FSC next week," an FSS official said.

The FSS has been reviewing whether the U.S. firm, which owns KEB, is eligible to own more than a 10 percent stake in the bank as a financial player according to local banking law.

The FSC is likely to conclude that it is difficult to designate Lone Star as an industrial capitalist, as legal assessments can vary, the sources said.

Since Lone Star has been disqualified as KEB's largest shareholder and ordered to sell most of its stake, it does not have any direct impact on its sale of KEB to Hana Financial, they said.

There has been controversy over whether Lone Star, who bought a controlling stake of 51.02 percent in KEB in 2003, should have been recognized as a non-financial player, which then the law allows only to own a stake of up to 4 percent in a financial company.

Late last year, a local court found Lone Star guilty of manipulating stock prices related to the merger of KEB's card unit in 2003.

The FSC will soon decide on the approval of Hana Financial's application to affiliate KEB under its wing after it wraps up Lone Star's reclassification.

In December last year, Hana Financial Group agreed with Lone Star to cut the price of purchasing KEB by 11 percent to 3.92 trillion won ($3.41 billion), paving the way for the U.S. firm to exit from the Korean market. (Yonhap)