Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
FSS chief rebukes Taeyoung Group's lack of sincerity in corporate restructuring plan
Financial Supervisory Service (FSS) Governor Lee Bok-hyun speaks during a New Year press conference at FSS headquarters in Seoul, Thursday. Yonhap
By Anna J. Park
More global investment banks investigated for illegal short selling
Financial Supervisory Service (FSS) Governor Lee Bok-hyun strongly chastised Taeyoung Group's insincere attitude in recent negotiations with creditors during its construction subsidiary's corporate workout process, which began at the end of last year.
During a press conference held at the FSS headquarters in Seoul on Thursday, the FSS head said that financial authorities are closely monitoring Taeyoung Group's failure in following through its own debt restructuring rescue plan, which had been submitted as part of the workout negotiations for the revival of Taeyoung Engineering & Construction (E&C).
While Lee said the government is ready with market stabilization plans to minimize the losses borne by the construction company's partners and the overall construction sector, he criticized the group's emphasis on preserving the founding chairman's wealth and interests, rather than finding a genuine restructuring plan to satisfy Taeyoung E&C stakeholders.
"As the nature of real estate project financing involves a variety of different stakeholders, the creditor group of Taeyoung E&C believes a truthful and sincere commitment from Taeyoung Group is necessary to facilitate a consensus among stakeholders. However, instead of putting in efforts to minimize losses borne by Taeyoung E&C's subcontractors and creditors, the group seems to prioritize safeguarding the core property shares of the group's owner family members," the FSS governor said.
Lee went on to point out that the group's rescue plan shows that it does not intend to spend a penny of the founding chairman's personal wealth to pay back the losses faced by financial creditors or the construction firm's subcontractors. He called this behavior selfish and illustrating "the privatization of profits and socialization of losses."
"During the real estate boom, Taeyoung E&C undertook both roles as a developer and constructor, reaping substantial profits amounting to over 1 trillion won ($763 million), and a significant portion of it contributed to increasing the founding chairman's personal wealth. However, when a downturn hit the real estate market, the losses are now expected to be borne by subcontractors and financial creditors," Lee said, adding that the creditors now view that the group's initial vow to undergo substantial restructuring efforts, at the time of applying for the workout, actually meant "efforts to carve others' bones rather than their own."
Financial Supervisory Service (FSS) Governor Lee Bok-hyun speaks during a New Year press conference at FSS headquarters in Seoul, Thursday. Yonhap
The FSS head warned that the deadline for salvaging the workout plan is next Thursday, urging Taeyoung Group to come up with more sincere rescue plans and reach agreements with the group of creditors represented by Korea Development Bank. Lee added that since the corporate debt restructuring is by nature a voluntary agreement among creditors, the financial authority cannot force its position on either party.
Despite such limitations on the part of financial regulators, Lee stressed the government is fully in control and ready for diverse contingency scenarios for the sake of maintaining overall stability of the market, including short-term liquidity markets.
Probe of illegal short selling by global investment banks
In regard to the financial watchdog agency's recent focus on investigating the illegal short selling practices of global investment banks and handing out penalties, Lee said the FSS has widened its investigation into several other banks after recently punishing the first two — the Hong Kong operations of BNP Paribas and HSBC.
"Currently, the FSS is nearing the completion of investigations on some global investment banks' illegal short selling practices, as we secured evidence. The patterns of global financial companies' illegal short selling practices will be analyzed thoroughly and reflected in devising the country's new short selling regulations," the FSS chief said, adding that the findings of the ongoing investigation will be announced in the near future.
Regarding a question posed by The Korea Times on how to win back foreign investors' trust in Korean capital markets, after it seems to have dissipated somewhat over the government's sudden complete ban on short selling until next June, the FSS chief responded that the watchdog agency has been paying careful attention to the opinions and positions of foreign financial companies and strengthening communications with them.
"The FSS is also mulling over various options to strengthen communication with global financial companies to closely maintain and share mutual understandings on matters like the short selling ban. We're also considering a joint session with Hong Kong's financial authorities or an international relations event later this year. Yet, none of these options are confirmed as of now," Lee said during the press conference.