By Yi Whan-woo
A court ruling has ordered the Financial Supervisory Service (FSS) to disclose its criteria for allowing U.S-based buyout fund Lone Star to take over Korea Exchange Bank (KEB) in 2003.
The Seoul Administrative Court ruled Friday that the country’s financial watchdog must release its documents to the public and show whether the non-financial assets of the Texas-based fund were less than 25 percent of its total capital.
The ruling came after KEB employees, who are shareholders of the local bank, filed a suit against the financial regulator last November.
The financial regulations prohibit a nonbanking entity from owning financial institutions, including banks, when its non-financial assets are more than 25 percent of its total capital.
Critics have raised doubts about the legitimacy of the KEB takeover by Lone Star.
The American private equity was known for its aggressiveness in merging other companies, including a hotel and its 23 affiliates in Japan. The combined non-financial assets Lone Star was estimated at over 8 trillion won ($7.1 billion), above a quarter of its total capital.
The FSS, however, said in October 2011 that Lone Star met its financial criteria in acquiring the KEB. The bank’s employees who hold shares of the bank then demanded the FSS to reveal its criteria. But the FSS refused to do so, saying that Lone Star was standing trial and that releasing its documents could affect a court decision.
“Making its documents public won’t affect other court’s rulings,” the court said. “Lone Star has drawn nationwide attention and disclosing the documents will rather help the FSS boost its transparency and objectiveness.”