By Kang Seung-woo
The vice chairman of the nation’s financial regulator hinted Thursday that the financial authorities are against the consolidation between Woori Investment & Securities and Daewoo Securities.
“I wonder if it will work efficiently when financial firms are combined just to beef up their size,” Kwon Hyouk-se, vice chairman of the Financial Services Commission (FSC), said in a meeting with reporters. The 54-year-old life-time bureaucrat is also a nominee for the governor of the Financial Supervisory Service (FSS), the executive body of the FSC.
“For example, Woori Investment & Securities is short of funds to strike a deal overseas, but raising capital via a merger and acquisition (M&A) is not the only way.”
His remarks drew attention as the government-backed Daewoo Securities, which is owned by the Korea Development Bank, has been trying to acquire Woori, the brokerage unit of Woori Financial Group, in its attempt to create a giant investment bank (IB). Woori Financial is a state-run entity up for sale.
“If size does really matter in the financial industry, the Industrial and Commercial Bank of China (ICBC) would have to be the No. 1 bank in the world (but it is not),” he said.
“In terms of capital strength, it may be better off than before, but it does not guarantee that a larger size leads to improved efficiency at the end of the day.’’
FSC Chairman Kim Seok-dong also said Wednesday that efficiency is more important than size in terms of increasing a bank’s global competitiveness although Kwon’s comments went further being applied to all financial institutions.
Kwon also spoke out against the idea of a mega bank ― the making of a super-size bank by artificially merging two or more retail banks under the supervision of the government.
“The government tried to create a mega bank, but I am not sure if that kind of lender will turn out to be productive,” he said.
“Human resources and networks are the cornerstone asset of the financial sector, not the size of capital. Just raising funds without innovation may end up generating a diseconomy of scale.’’
Meanwhile, tighter restructuring programs by the financial authorities on troubled local construction firms are in the offing, he added.
As the housing market has yet to see a recovery and more than a quarter of the nation’s top 100 builders are undergoing debt restructuring or in court receivership, the construction sector is going through a crisis.
“We are striving to revive the corporate restructuring law as a host of builders are expected to go through reviews on their financial status next month,’’ Kim said.