To anyone who wants to know what is happening in South Korea’s banking industry, a recent deal between Shinhan Financial Group and the South Korean government could be all-revealing.
Testament to its uninterrupted reform efforts toward the banking industry, the government agreed in early July to sell its 80% stake in Chohung Bank, the country’s oldest and third-largest lender, to Shinhan Financial, the fourth-largest.
The birth of the mammoth bank, whose combined assets stood at 149,000bn won ($126.3bn) as at end-March is the latest in a series of banking consolidation moves in South Korea’s banking sector.
The plan, first floated late last year, is to make the overcrowded banking sector look more presentable by overhauling it into a more cost-effective and more competitive field.
For the government, which is now scurrying to recoup as much as possible of the public funds spent in bailing out ailing banks, the sale was also part of its efforts to sell off the holdings in several South Korean banks that were nationalised in the wake of the financial debacle in late 1990s. A total of 2700bn won in bail-out funds has been pumped into Chohung since it was nationalised in 1998 at the height of the financial crisis.
