FSC loses face over KB, Hana feuds

The Financial Services Commission, the nation’s top regulator, appears to be losing face lately as its position on key financial issues are being repeatedly contradicted by legal authorities.

It was especially blamed for breaking neutrality and interfering in the KB Financial Group’s internal leadership feud last year as also Hana Financial Group’s ongoing management-labor dispute over its merger with Korea Exchange Bank.

FSC chairman Shin Je-yoon was grilled by opposition lawmakers during the parliamentary state affairs committee meeting on Thursday, over Hana Bank’s controversial merger process.

On the previous day, the Seoul Central District Court issued an injunction which suspended the merger process until June.

This decision delivered a blow not only to Hana Financial Group, which has suffered a setback in launching an integrated bank, but also to the FSC which had alluded that the merger would progress smoothly.

“We have given Hana and KEB enough time to reach an agreement but cannot afford to wait any longer,” the FSC chief had said earlier in January.

“It is now time to deal with the issue strictly, based on laws and principles.”

He admitted that this means that the merger could move ahead, even without an agreement with the KEB union.

Shortly afterward the financial group filed for the FSC’s preliminary approval of the merger, which made the unionists file for a court injunction.

But the chairman denied the allegations that he sided with Hana Financial’s management and pushed it to take a hard line toward the union.

“The FSC has been demanding for a management-labor agreement all along, a stance which is in line with the court’s decision,” Shin said.

“It is just that the court applied a stricter standard to the level of agreement.”

The chairman is, however, overlooking the fact that the FSC is the nation’s top financial regulator and its remarks have a decisive influence on the financial industry, according to opposition lawmakers.

“Chairman Shin has damaged the independence and trust of the regulator, as he made people believe that the FSC is strongly leaned toward approving the Hana-KEB merger,” said Rep. Han Myeong-sook of the main opposition New Politics Alliance for Democracy.

Another hot potato for the financial regulator is that the prosecution cleared former KB Financial Group chairman Lim Young-rok of the charges of interfering in business.

This decision, too, perplexed the FSC as it had handed down a suspension of duty on Lim, de facto forcing him to step down and take responsibility for the group’s internal feud over the computing system replacement.

By Bae Hyun-jung (tellme@heraldcorp.com)