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Banking

Korea: Korea continues its love/hate affair with foreign capital

A research report published in May by the Institute for Monetary and Economic Research, part of Korea's central bank, recommends that regulators in Korea promote more investment in domestic banks by domestic investors at the expense of foreign capital.

To the extent that foreign capital is necessary for domestic banks, the report urges the government to investigate the nature of this capital. In particular, the report suggests that foreign banks are preferable to foreign private equity firms.

A number of international private equity firms have invested in distressed Korean banking and other assets following the Asian financial crisis, including Newbridge Capital and Carlyle Group. Some of these firms have recorded huge profits on their investments as strategic stakes were sold off, most notably in Koram Bank and Korea First Bank.

There is some anecdotal evidence to suggest a shift in asset sales towards Korean buyers.

The recent auction of local distiller, Jinro ended with a shortlist of three all-Korean consortia. SK Life Insurance is now being sold to local fund manager, Mirae Asset after US firm MetLife pulled out citing labour problems.

And the government recently announced the sale of asset management firm Daehan Investment for $477 million to local lender Hana Bank, which appears to be in disagreement over the terms upon which original consortium investor Temasek Holdings, a Singapore private equity firm, was originally intending to invest.

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