Board of Audit and Inspection to examine FSC, FSS until Feb. 24
The Board of Audit and Inspection launched an intensive investigation into the nation’s two financial regulators on Monday.
The state auditor, which completed its preliminary audit earlier this month, will carry out an intensive audit on the Financial Services Commission and the Financial Supervisory Service between Jan. 30 and Feb. 24.
The audit comes after the FSC endorsed Hana Financial Group’s application to take over Korea Exchange Bank from Lone Star Funds last Friday.
A group of lawmakers continued to call for the BAI to investigate allegations that the regulators have been negligent in their examination of the shareholder eligibility of Lone Star.
On the same day, Rep. Park Young-sun of the main opposition Democratic United Party speculated that Hana Financial chairman Kim Seung-yu’s connections to President Lee Myung-bak could have played a similar role as in the financial scandal involving BBK.
Some opposition lawmakers alleged that the presidential office put pressure on the FSC to quickly approve the deal between Hana and Lone Star.
While the BBK scandal reportedly involves President Lee before he took office, the lawmakers argued that Hana Financial could be successful in gaining regulatory approval as its chairman Kim is a college friend of President Lee.
As Lone Star was a non-financial investor, which is banned from controlling a Korean bank, the preliminary deal between Hana and Lone Star deal was originally invalid, they said.
They highlighted that therefore, the FSC’s approval of the takeover deal is also not valid.
In addition, court trials on the U.S. buyout fund’s shareholder eligibility have been underway. A trial is scheduled to be held on Feb. 1.
The prosecution is investigating the allegations that senior regulatory officials including FSC chairman Kim Seok-dong had sought to conceal key documents on Lone Star.
Meanwhile, an FSC official stressed the audit is reportedly focused on the overall supervisory systems and duties of the FSC and the FSS.
The BAI has not made public as to whether the Lone Star issue has been included in its audit list.
An FSS official said, “While auditors will conduct inquiries into a variety of sectors, there is a possibility that they will also look into the Lone Star issue.”
On Friday, the FSC admitted that Lone Star could be classified as a non-financial investor as its non-financial assets surpassed 2 trillion won ($1.75 billion) at the end of 2010.
But the regulator said, “(In consideration of various factors), the fund could not be regarded as a non-financial investor.”
The contradictory regulatory ruling has been inviting mounting criticism in the market.
By Kim Yon-se (
kys@heraldcorp.com)
