Hana-KEB merger plan hits another snag

Political intervention adds fuel to conflict

By Choi Kyong-ae

Political intervention is fueling an internal feud between the Korea Exchange Bank (KEB) and its union over the planned integration with Hana Bank.

The KEB union sought help from politicians representing opposition parties, such as the New Politics Alliance for Democracy and the Justice Party. They did so after a statement the bank issued last week, saying it would take disciplinary measures against 10 percent of its workforce to retaliate for labor activities early this month that the bank considered illegal.

KEB union chief Kim Geun-yong and the opposition party members held a press conference at the National Assembly, Wednesday, in which they called the planned disciplinary measures illegal and asked the government to take action against them.

“If the company dismisses 898 employees because they joined a union meeting, it is definitely unfair and illegal,” Kim and the lawmakers said in a joint statement. “If the Financial Services Commission sits idly by without taking any action against the company’s illegal crackdown on workers, we will bring the issue to the National Assembly.”

Inspections of government offices, including the financial regulator, are scheduled for next month.

Analysts said a third party’s intervention in the bank’s internal dispute would only make things worse, drawing parallels to the case of KB Financial Group. Two top executives ― KB Financial Group Chairman Lim Young-rok and KB Kookmin Bank President Lee Kun-ho ― recently left the company after prosecutors and financial regulators imposed penalties over a management decision.

“Internal fights will hurt shareholders’ value and ruin consumer confidence in KEB as well as Hana Bank,” Kim Jae-seung, an analyst at KDB Daewoo Securities, said by telephone.

A KEB disciplinary committee met for five days ending Wednesday to decide on punitive moves against some 900 unionized workers. The workers left their workplaces on Sept. 3 to participate in a general union meeting, despite warnings from the company.

In February 2012, the Hana Financial Group bought a controlling 51.02-percent stake in KEB for $3.8 billion from the Dallas-based Lone Star Funds. The banks then agreed to pursue integration five years later ― that is, in February 2017.

But now the management of Hana and KEB are seeking integration earlier than scheduled.

“As the banking industry is not a growth business any longer, an earlier integration may help the banks focus on their strengths and weather uncertainties,” the analyst said.

For KEB union members, however, the greatest fear is that many KEB workers will become redundant after integration and face layoffs.

Management has repeatedly said it was committed to job security, but the union wants management to stick to the original agreement and delay integration until 2017.

KEB was delisted from the Korea Exchange in January 2013.