Conversion Precedes Stake Sale
Financial authorities have decided to sell the government’s remaining stake in Woori Bank after converting it into a holding company.
According to financial industry sources and financial authorities on May 15, the Public Fund Oversight Committee of the Financial Services Commission has approved a plan to convert Woori Bank into a holding company before selling off the government’s remaining stake in it.
Woori Bank is expeccted to resume the process to adopt a holding company system, which was halted due to the change of government and a recent recruitment scandal
Financial authorities decided to convert Woori Bank into a holding company first and then sell the government’s stake in the bank on the grounds that selling the stake first could constitute an unfair trading practice using insider information.
Some market experts say the move is intended to sell the government’s remaining stake after raising the bank's value through conversion into a holding company. The government currently has an 18.4 percent stake in the bank, excluding its call option to acquire an additional 2.97 percent .
Others say that the authorities proposed the time table for conversion because they can be held responsible if the price of Woori Bank shares goes up after the sale of the government’s stake.
In this regard, oligopolistic shareholders claim that the FSC needs to officially announce its will for privatization by lowering the government’s stake to a single digit even selling the stake after the conversion. They also say that it should reduce the breath of the government by reducing the government’s stake to a single digit and excluding non-executive directors assigned by the Korea Deposit Insurance Corporation from the board of directors considering the current situation in which foreign investors hesitate to make an investment in Woori Bank because of “the government risks.”
An official from the financial industry said, “Foreign investors are passive in buying the shares because they don’t feel any concrete will for privatization. When I meet investors, they say that the government has strict regulations and are not sure if the government will pursue privatization.” In fact, the ratio of foreign shareholders in Woori Bank stood at 27.21 percent at the end of last year, which was much lower than other financial holdings with 70 percent.
Woori Bank is forecast to apply for apreliminarylicense for the conversion into a holding company by the end of next month. Since the bank adopted the holding company system in the past, it can shorten the period. However, it aims to complete the conversion by the end of the year given the fact that it takes about six months to receive deliberation and final approval from the Fair Trade Commission (FTC), hold a general meeting of stockholders and list stocks.