Chairman & CEO Hong Kyttack of 

KDB Financial Group.

Chairman & CEO Hong Kyttack of KDB Financial Group said the Korea Development Bank (KDB) will continue to be a state bank that handles mostly policy loans from funds provided by the government and raised through the issuance of bonds by the bank.

Hong is concurrently president of KDB.

The new chairman, who quit his post at Chung-Ang University as an economics professor, said during an interview with local media that the bank will also undertake an advisory role in matters of corporate business operations and step-by-step financial assistance for corporations on issues such as mortgages.

Hong stressed that KDB will be a faithful handler of policy loans for businesses rather than individuals.

In the past, the privatization of KDB was a topic of serious discussion, but that was before the financial crisis. “Things have changed now,” he said. The Lehman Brothers’ fiasco changed all that, although KDB was going to take up investment banking and engage in M&As, projecting greater profits from the sector. But the Lehman bankruptcy in the second half of 2008 ended that plan.

The bank will encourage corporate restructuring and support start-up companies to be successful as its main jobs. Hong said he thought about the importance of policy loans even before he joined the Presidential Transition Committee.

“In order to help start-ups grow, we need to give step-by-step financial support to them,” Hong said.

Hong also said KDB will go slowly in reducing the provision of private loans, while strengthening the policy loan sector, since the private sector has deposit accounts at KDB.

He said KDB’s future plans should be redrawn in consideration of President Park’s pledges because she is a person who keeps her promises to the people. One of the things she pledged was setting up a financial entity to provide support to the shipping industry, as it should be included in the reform plan of policy loan financial entities.

KDB would have to take the lead in restructuring for firms that need it immediately, especially for the firms whose restructuring could have a large impact on the economy.

KDB has many engineering college degree holders among its employees and the bank can easily set up an intelligent property financial fund as a model and lead the industry in that area as it has done for the past 50 years. The bank should also lead the progress of the “Creative Economy,” a policy priority of the new government designed to put Korea in the ranks of advanced nations. President Park always thinks about the nation’s future, which is why the Ministry of Science, ICT and Future Planning and the Institute for Future Research were created.

“We plan to strengthen our role in the area of creative finance by expanding financing for protecting intellectual property rights,” Hong said.

In the meantime, KDB officials said the group plans to sell KDB Daewoo Securities and KDB Life Insurance Co. KDB also should stop its moves to privatize itself and stop selling its shares so that it will remain a policy loan bank and sell instead its stakes in its affiliates that are being privatized. 

“Keeping KDB as a state-owned bank is the aim of the new government and KDB will provide financial support to startups and the development of technologies in back up the Creative Economy pushed by the government,” officials of KDB Financial Holdings said.

KDB Financial Holdings holds a 43 percent stake in KDB Daewoo Securities, a 34.5 percent stake in KDB Life Insurance, and a 31.3 percent stake in KDB Daewoo Shipbuilding and Marine Engineering Co. (DSME). About 2 trillion won could be secured through the sale of the stake in KDB Daewoo Securities including the sale of shareholdings as well as 2 trillion won each from the sales of the stakes in KDB Life and KDB DSME. The government would like to use the funds to help the Creative Economy be a great success.