South Korea’s top financial regulator on Monday said it was “cautious” on Korea Development Bank’s interest in taking over a bank such as Lehman Brothers, stressing that such a deal would be better led by private lenders.
Jun Kwang-woo, chairman of the Financial Services Commission, told reporters he was aware that KDB was considering the possibility of buying a global investment bank.
“In principle, taking over a global investment bank can become an opportunity to raise the capability of the [Korean] investment banking business,” Mr Jun said.
“But at the same time, as the risks are also big, KDB should take a cautious approach.
“We welcome any efforts led by the private sector to go global, but it may not be proper for state-owned financial institutions to lead the role and take on excessive burdens.”
Lehman shares were down 6.7 per cent at $13.45 at the close in New York on Monday.
The Financial Times revealed last week that KDB had spoken to Lehman about buying a 50 per cent stake but failed to reach an agreement.
According to people familiar with the negotiations, the Koreans discussed a two-step process under which KDB would buy a 25 per cent stake directly from Lehman and another 25 per cent though a market tender.
Lehman is considering options to raise cash before its mid-September earnings report, which JPMorgan analysts expect will include writedowns of up to $4bn.
These include a sale of a stake in Lehman itself or the sale of all or part of its asset management arm or its commercial real estate portfolio.
KDB said on Monday that it was “thinking about various options [to raise competitiveness]” ahead of a planned privatisation.
However, the lender declined to comment on its interest in Lehman.
Last month Min Euoo-sung, KDB’s new chairman and a former head of Lehman in South Korea, said the lender would actively seek overseas takeovers.
He added that subprime woes in the US provided an opportunity for KDB.
“Plans for mergers and acquisitions in foreign markets are included in our strategy to develop into a global financial company,” Mr Min said.
South Korea plans to privatise KDB by 2012 by setting up a holding company, and is preparing for an initial public offering next year.