ED Privatizing Woori Bank
The Financial Services Commission has picked seven investors to buy a combined 29.7 percent stake in the state-owned Woori Bank in its latest bid to privatize the lender. Seoul-based IMM Private Equity will acquire the largest stake of 6 percent, while Mirae Asset Management will buy the smallest portion of 3.7 percent. The remaining five were assigned 4 percent each.
The sale marks the completion of the first stage of privatizing the bank, which the government took over in 2001. The success of the latest auction would leave the stake of the state-run Korea Deposit Insurance Corp. (KDIC) at 21.4 percent.
The latest stake sale follows four failed attempts to sell KDIC’s entire shares to a single bidder.
The government’s interference in the bank’s management and personnel affairs has hindered the previous attempts at selling off its stake.
The bank’s CEO changes almost every time a new government is formed, interfering with the bank’s management. The bank’s business policies have been adrift as CEOs stick to short-term achievements rather than long-term investments for the future. In this process, bureaucrats and politicians have taken up key posts at Woori Bank, prompting criticism that the government has been shelving the privatization move on purpose.
The success of the latest stake sale is attributed largely to the government’s decision to sell the bank’s shares to oligopolistic shareholders so each can recommend one outside member for the bank’s board of directors. The directors will be entitled to appoint the head of the bank in what appears to be a move aimed at ensuring shareholders’ managerial rights.
Now the market’s attention is shifting to when Woori Bank’s remaining shares will be put up for sale. The financial regulator is reportedly in a position to maximize its retrieval of public funds by selling them when the bank’s share prices rebound. Given the urgency to normalize Korea’s financial industry, there is no need for the government to drag its feet on selling the remaining shares.
What should follow is to ensure the elimination of the government’s interference in the bank’s management. To be sure, the privatization of Woori Bank will end in failure if the government intervenes in its management and personnel affairs through KDIC, still the largest shareholder.