A few things can be said about all this. First, Lone Star's defeat may well signal the high tide of Western vulture funds in Asia, and this is no bad thing. Private equity investors can sweep in like archangels of change -- I'm thinking of Shinsei Bank in Tokyo, among others -- but by picking up assets in temporarily advantageous times, they can also skew economic plans in developing countries and do more harm than good at moments of important transition. Given that they also tend to bail out after a few years, they're not a lasting solution to anything.
Second, banking is a strategic industry everywhere -- especially in South Korea, of course, where they were the conduits of funds by which the old regimes built up the chaebol conglomerates.
There is nothing illogical in a new government managing change in the industry carefully. That is what Seoul has been doing: consolidating the sector and overseeing a shift in business that is essential to the nation's efforts to develop domestic demand.
Which leads to a third point. Let's not take the SeoulBank case as evidence that those South Koreans are impossible xenophobes when it comes to foreign investment. They've come a long way from the old days -- ask the people at General Motors Corp, who are now setting out to knock Daewoo Motor Co. into shape. For that matter, ask them at Hana Bank: It's not quite half owned by foreign investors, among them Allianz AG, the German insurance giant, which holds a 12 percent share.
SeoulBank has been cleaned up admirably since its nationalization. Non-performing loans are down from 20 percent of its portfolio to 2 percent. Chaebol lending is down and consumer banking up.
Under Woori Finance Holdings, in which the government has placed its remaining interests in the banking sector, the reshaping of the Korean industry has proceeded at a more than respectable clip. The sale of SeoulBank, when it is completed later this year, will be an important step in the process.
Awarding Hana Bank the prize is just what needed to be done.
Patrick Smith is a former correspondent in Asia.
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