The Korea Development Bank is set to withdraw from negotiations to buy Lehman Brothers following government pressure. The state owned bank has been advised by government officials that they deem the investment too risky given the current market conditions, and aren’t willing to make the financial commitment required. Analysts have said the move is the latest attempt by the South Korean authorities to boost the Won by diverting funds usually allocated for foreign exchange reserves into supporting the Won.
Indeed, July alone saw $10.5 billion of Korea’s foreign exchange reserves spent on supporting the Won, which has suffered from fears that Korean industry will be harmed by increasing commodity prices. Meanwhile, with the sub-prime crisis having global implications, there are fears that the sizeable borrowings of Korean households may lead to a similar situation arising in Korea. The authorities have been criticised for their persistent attempts to boost the Won, with experts suggesting they are fighting a losing battle.
Jung Kwang Woo, chairman of Korea’s Financial Services Commission, said, ‘I think that KDB might have considered forming and leading a consortium, but it appears burdensome for a state run institution to play a leading role and take risks which may be more than financial’.
Korean Bank to Withdraw from Lehman Brother Takeover Talks
Korean Bank to Withdraw from Lehman Brother Takeover Talks
Wed, 27 Aug 2008
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