In an attempt to limit the financial regulator’s excessive use of power, lawmakers are set to submit a revision bill that bans the Financial Supervisory Service from interfering in corporate restructuring unless it obtains the creditors’ consent.

The corresponding clause, however, could have a double-sided effect as it also offers a legal basis for the FSS to step in as long as it meets the stated requirement.

Rep. Chung Woo-taik, lawmaker of the ruling Saenuri Party and chairman of the parliamentary committee of state affairs, will submit a revision bill of the corporate restructuring promotion act in the National Assembly on Monday, according to officials.

The key content of the bill is to expand the autonomy of creditors in the case of corporate restructuring and to limit the FSS’ intervention.

Should the bill take effect, the main creditors will have the authority to request for a credit exercise delay instead of the FSS governor.

The regulator, on the other hand, will have to obtain consent of 50 percent of the creditors in order to have a say in the issue. Also, its arbitration plan will have no binding effect on the creditors and the corresponding company.

This restriction largely reflected the recent allegations that the financial body went a step too far in the restructuring process of the disputed Keangnam Enterprises.

Last week, the prosecution raided the residence of former FSS deputy governor Kim Jin-soo on allegations that he had pressed Keangnam creditors to approve a debt-to-equity swap without capital reduction, a decision which was particularly in favor of the struggling company.

The Board of Audit and Inspection had also suggested that the FSS acted in favor of the deceased chairman and shareholders, and exerted pressure on creditors to accept the swap plan.

“Under the present law, the FSS may not explicitly interfere in corporate restructuring but it would often pose as arbitrator, in which case creditors have no choice but to follow its decision,” said an aide to Rep. Chung.

The point of the revision bill is to set clear rules for the FSS’ intervention and bring the issue into legal boundaries, officials said.

But industry observers pointed out that the revision bill may bring up new disputes as it explicitly allows the FSS to exert its authority, as long as it meets the given requirements.

“The Keangnam case showed the tight control that the FSS has on corporates and creditor banks, on the pretext of promoting financial soundness in the market,” said a banking official who refused to be named.

“Or, (the FSS) may even push creditors for 50 percent consent, in which case the purpose of the revision bill will be overshadowed.”

By Bae Hyun-jung (tellme@heraldcorp.com)