S&P's Industrial Bank of Korea ratings unaffected

Standard & Poor's said there would be no impact on the ratings on Industrial Bank of Korea (A-/stable/A-2) if the government reduces its direct ownership of the bank from 51% to 35%. The reason for the sale, which has been reported in South Korean media but not yet confirmed by the South Korean government, is likely to be related to national budget concerns rather than changes in the policy role of the bank, the agency said. Total government ownership, including indirect ownership through other policy banks, is not expected to fall below 50%.

The South Korean government is expected to cut its equity stakes in a number of public enterprises this year to make up for expected shortfalls in tax revenue. S&P said that while it does not view this as a major change in the South Korean government's overall policy toward privatization, it could be interpreted as a shift in the government's stance from direct involvement to more market-based economic mechanisms.

The ratings on the bank already take into consideration the likelihood of a gradual reduction in government ownership, given the bank's diminishing role in supporting the nation's small and midsize enterprises, the agency said.

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