KDB will merge with KoFC

Government giving-up on privatizing KDB.

South Korea is preparing to merge state-run Korea Development Bank or KDB with state-run policy lender, Korea Finance Corporation (KoFC). The latter is a policy lender focusing on support to smaller firms.

The government decision follows four years of thwarted attempts at privatizing KDB, according to analysts.

KDB Financial Group was created as the holding company for KDB and four other units in October 2009 following the government push to privatize the lender.

The current administration of President Park Geun-hye, however, is planning to reshape the policy lender scheme by reuniting KDB with KoFC in four years, thereby throwing privatization out the window.

As part of this move, the Financial Services Commission, the financial regulator, could announce detailed plans for the KDB merger later this month. This will also include the break-up of KDB Financial Group, which is 100% government owned.

The sale of KDB was an ambitious policy project pushed by the previous government as part of its broad plans to privatize public institutions.