South Korea's chief financial regulator on Monday hinted he may approve a merger of two local banks without an agreement with the labor union, a change from his earlier stance.

Hana Financial Group Inc., South Korea's third-largest banking group by assets, has been trying to integrate its flagship Hana Bank with the Korea Exchange Bank, which it bought in 2012 from U.S. buyout firm Lone Star Funds for 3.9 trillion won ($3.57 billion). But the merger attempt had been deadlocked for months due to strong opposition from KEB's union, which says the move violates a prior promise to keep KEB independent for five years.

"I've watched the negotiations between Hana Financial and the KEB's labor union since July last year, but nothing has improved yet," Financial Services Commission Chairman Shin Je-yoon said in a parliamentary session. "I think I've given them enough time."

He said there is a possibility that the FSC would approve the merger even if Hana Financial submits a proposal without an agreement with the KEB union.

Shin, however, added "Still, I think it's desirable to proceed with the integration by mutual consent," calling for speedy negotiations.

Shin's remarks reflect a turnaround from his earlier position that the consent of the KEB labor is a prerequisite for the banks' merger.

Despite the stalled integration process of the domestic units, Hana Financial has been quickening integration of the two banks' overseas units, with their subsidiaries in China completing the merger in December.

Shares of Hana Financial closed at 32,150 won on the Seoul bourse, down 0.46 percent from the previous session, with the benchmark KOSPI slipping 0.19 percent. (Yonhap)