Differences in Views Between Ruling and Opposition Parties' Political Affairs Committees Over Lone Star's 292.5 Billion Won Compensation... Likely to Become a Key Issue in the National Audit

"Just Under 1 Trillion... Amount Holds Up" vs "Procedures Not Followed... National Treasury Burden"

Photo related to Lone Star

[Asia Economy Reporter Koo Chae-eun] The National Assembly's Political Affairs Committee showed divided reactions between the ruling and opposition parties regarding the South Korean government's 292.5 billion won compensation ruling in the 6 trillion won lawsuit filed by the U.S.-based private equity fund Lone Star.

In particular, the fact that the compensation amount was only 4.6% (216.5 million dollars) of Lone Star's claim of 4.68 billion dollars, partially winning the case, and the clear differences in views between the ruling and opposition parties on the principle of separation of banking and commerce and the appropriateness of financial authorities' intervention are variables.

During the national audit, discussions on policy and regulation improvements as well as accountability for current and former officials are expected to arise.

Yoon Chang-hyun, member of the People Power Party./Photo by Yoon Dong-joo doso7@

Yoon Chang-hyun, a financial expert within the People Power Party, evaluated in a phone interview with this paper, "The compensation amount was expected to be around 1 trillion won, but since it is far below 1 trillion, it is a relatively good result."

Yoon viewed this ruling as a difficult issue to hold financial bureaucrats accountable for. He said, "At the time, New Money was desperate for Korea Exchange Bank, and the damage would have been significant if it went bankrupt," adding, "Existing shareholders and public funds could not be injected, and Lone Star proposed acquiring shareholder equity and issuing new shares, so some procedures were missed in the desperate situation, which should also be considered." He added, "We should also comprehensively consider that the 'Byeon Yang-ho syndrome' later spread a welfare department-like attitude in the civil service society."

Regarding the core issue of financial authorities' responsibility?the exception to the principle of separation of banking and commerce (allowing Lone Star, classified as 'industrial capital' under the Banking Act, to acquire bank capital)?he said, "Private equity funds are a form of fund that gathers money from many people in the big picture, so whether it is appropriate to classify them as industrial capital and apply the separation of banking and commerce logic should be examined."

Lee Yong-woo, Member of the Democratic Party of Korea./Photo by Dong-joo Yoon doso7@

On the other hand, Lee Yong-woo, a representative financial expert within the Democratic Party and former CEO of KakaoBank, pointed out in a phone interview with this paper, "The implication of this case is that financial policies must follow 'procedures' and 'regulations' during execution."

He said, "The 'separation of banking and commerce' issue is something that needs to be carefully examined but was overlooked, and if the Basel Committee on Banking Supervision (BIS) capital ratio had been verified through a third-party accounting institution, it would have been transparent." Lee added, "Even if the policy direction is correct, there are detailed procedures that must be followed, and if these are missed and things are rushed like in the Lone Star case, it can ultimately lead to a burden on the national treasury."

As an example of the government's wrong market intervention similar to the Lone Star case, Lee cited Financial Supervisory Service Governor Lee Bok-hyun's remark that "bank loan interest rates are too high." Lee said, "That statement risks becoming government market intervention. It would be more appropriate to say something like 'the internal regulations for banks' interest margin calculation should be clarified,'" adding, "The lesson from this case is that the government must not neglect procedures and legitimacy during market intervention."

This content was produced with the assistance of AI translation services.