The South Korean top financial regulator will likely delay giving approval for KB Financial Group Co.'s takeover of LIG Insurance Co., the No. 4 non-life insurer, citing the banking group's sloppy reform for governance structures after its internal strife, officials said Tuesday.
   
The country's second-largest financial holding company by asset had been rocked by internal conflict as leaders of KB Financial and its flagship Kookmin Bank clashed over the bank's costly computation system change. 
   
The company has been seemingly on a stable track as the two leaders resigned and the new KB Financial chairman was named in October by the financial authorities, after months-long bickering and interruptions. 
   
Yoon Jong-kyoo, the new KB Financial chairman, said at his inauguration ceremony last week, he would do his best to attain the FSC approval to take over LIG Insurance as the FSC has suspended the reviewing process due to the feud within the banking group. The company has sought FSC approval since it was picked as the preferred bidder in June.
  
But the FSC said outside directors, who command a majority at the boards of directors, should also take responsibility for causing the conflict between both the parent firm and the bank affiliate.
   
"Although some of (KB Financial's) outside directors stepped down, we don't see that KB Financial's governing system has improved," said a high-ranking official from the Financial Services Commission (FSC). "The company must prove that it made substantial efforts to reform its corporate governance."
   
As the FSC has increased pressure, chairmen of both KB Financial and Kookmin Bank's boards stepped down last week, and the boards will come up with a comprehensive plan to reform the company's governance and succession program until the next shareholders meeting in March.
  
"We will check whether KB Financial has good enough governance to manage LIG Insurance properly. This is the most important point in reviewing the request. It will take time, but we will scrutinize every detail of it," said the FSC official. "The company's reform plan will be one of the references."
   
As a result, the FSC decision can be made after March next year when the KB Financial's reform plan is scheduled to be unveiled.
   
Insiders say that the companies' outside directors made the slow-going decision in order to hold their seats until March.
   
"I can't understand why the board decided to publish its reform plan five months later despite the regulator's coherence," said an official from another local bank.
   
The takeover of LIG Insurance has been one of KB Financial's most coveted projects in a bid to strengthen its non-life insurance business.
  
Shares of KB Financial traded at 39,850 won (US$35.73) on the Seoul bourse as of 9:55 a.m., unchanged from the previous session.

The benchmark KOSPI stayed nearly flat at 1,977.68 points. (Yonhap)