[2025 Audit] Calls to Block "MBK-Style LBOs"... Lee Chanjin Vows "Stronger Oversight"

During the National Assembly audit, there were calls for financial authorities to directly regulate leveraged buyouts (LBOs) conducted by private equity fund (PEF) managers, as highlighted in the so-called 'Homeplus incident.' Lee Chanjin, Governor of the Financial Supervisory Service, also confirmed that preparations are underway to significantly strengthen the management and oversight framework for private equity funds.

Kim Namgeun, a lawmaker from the Democratic Party of Korea, stated during the Financial Supervisory Service audit by the National Assembly’s Political Affairs Committee on the afternoon of October 21, "With regard to private equity funds, MBK Partners acquired Homeplus, effectively drove it to ruin, and has now entered the liquidation process, which has become a problem. At the very least, LBOs by private equity funds should be regulated."

Yonhap News Agency

Assemblyman Kim pointed out that, in addition to Homeplus acquired by MBK Partners, many companies have been placed under court receivership, resold, or delisted. He argued, "When private equity funds, whose goal is to maximize short-term profits, acquire companies through LBOs, they often secure acquisition financing through excessive collateral, sell off real estate, pay excessive dividends, and ultimately devastate the companies they acquire."

He further criticized the National Pension Service, saying, "Although institutions like the National Pension Service can recover their investments or exercise direct oversight through stewardship code activities, they have remained completely silent in the face of this situation." He also pointed out that, unlike countries such as Japan and the United Kingdom, Korea does not properly supervise the implementation assessment, which is the core of stewardship code activities.

Accordingly, Assemblyman Kim insisted, "There is a need to amend the Capital Markets Act so that investors like the National Pension Service can receive reports on such investment plans by private equity funds." He added, "Financial authorities should be able to receive such reports and intervene by halting or issuing corrective orders in cases of excessive collateral provision. Rather than overseeing all LBOs, financial authorities should intervene in LBOs conducted by institutional private equity funds that seek to maximize short-term profits."

In response, Governor Lee stated, "Regarding LBO-type private equity funds, I have continuously raised concerns since 2015, when I served as a member of the fund management committee, about whether institutional investors providing capital for these deals meet ESG standards. I believe it is highly inappropriate."

He added, "Providing funding to LBO-type private equity funds is a very serious problem. From a supervisory perspective, we view this as a grave issue. We are preparing to significantly strengthen the management and oversight framework for private equity funds, and we plan to report on this matter to the Political Affairs Committee in the future."

He also emphasized that the Financial Supervisory Service is ready and willing to directly carry out supervisory work related to stewardship implementation assessment. Governor Lee stated, "Even without immediate legislative changes, if the Minister of Health and Welfare delegates some supervisory authority, we can exercise oversight to ensure that entrusted asset managers are implementing stewardship codes in line with ESG guidelines. If we are provided with institutional and legislative support, the Financial Supervisory Service will do its utmost."