HSBC in talks to extend exclusivity deal with Korean bank as deadline nears

HSBC is believed to be in talks to extend its non-exclusivity agreement for the purchase of Korea Exchange Bank (KEB) before tomorrow's deadline.

HSBC announced the $6.3bn (£3.15bn) acquisition of 51 per cent of KEB from Lone Star, the private equity firm, for cash in early September. Regulatory delays have caused the deal to drag on, and HSBC is now in danger of losing its exclusive status.

The South Korean authorities have insisted that they would not approve Lone Star's sale of KEB to HSBC until all legal matters connected with Lone Star had been resolved.

Paul Yoo, the head of Lone Star's South Korea business, was jailed for five years in February for manipulating the share price of KEB's credit card business to buy it cheaply. Lone Star and KEB were also found guilty of manipulation. Korean prosecutors allege that Lone Star's acquisition of KEB in 2003 was made at an artificially low price.

The regulatory position has not changed but the authorities have softened their approach since the election of Lee Myung Bak as President in February. Jun Kwang Woo, chairman of the Financial Services Commission, said last week he wanted to resolve the Lone Star affair quickly to the benefit of all parties.An HSBC spokesman said: "We hope to complete the transaction successfully."

HSBC wants to buy KEB to plug a gap in its network as it refocuses on Asia and emerging markets. The bank has missed out in South Korea before, leaving Citigroup of the US to buy Koram Bank in 2004 and allowing the UK's Standard Chartered to outbid it for Korea First Bank soon after.

KEB is the fifth-biggest bank by market value in South Korea, which isthe third-largest economy in Asia.