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RETAIL BANKING | Tony Chua, Korea
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South Korea regulator to order Lone Star to sell KEB shares

The American company said to have told the FSC it cannot find a way maintain status as KEB's major shareholder.

Korea's financial regulator is expected to order Lone Star Funds to sell the bulk of its stake in Korea Exchange Bank (KEB) after the U.S. buyout firm said it cannot meet the requirements as the major shareholder of the fifth-largest lender, watchers said Tuesday.

Lone Star reported to the Financial Services Commission (FSC) on Monday, the last day of a one-week deadline, that it cannot find a way to recover its status as KEB's major shareholder, according to sources.

Lone Star is currently the biggest shareholder of the No. 5 lender, holding a 51.02 percent stake.

Last week, the FSC sent an early notification to the private equity fund ahead of requiring Lone Star to meet legal requirements as KEB's major shareholder, taking the first administrative step toward ordering the funds to sell the bulk of its stake in KEB.

Although the one-week period was given to Lone Star to submit its opinion, the move was deemed as a de facto order, following the Seoul High Court's Oct. 6 verdict that found the U.S. firm guilty of stock manipulation charges.

Under local banking law, an executive or corporate entity that has been convicted of violating the law over the last five years is banned from owning more than a 10 percent stake in a lender.

View the full story in Korea Times.

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