HSBC says KEB deadline passes

By Kim Yeon-hee

SEOUL (Reuters) - Europe's biggest bank HSBC (HSBA.L) said it did not receive regulatory approval to buy a majority stake in Korea Exchange Bank by a deadline on Thursday, but is expected to stand firm on the $6.3 billion (3.2 billion pounds) deal.

The long-running deal, mired in outstanding legal issues, is seen as a test of whether South Korea is genuine in its pledge to open its financial sector wider to international investors.

HSBC had agreed to buy a 51 percent stake in KEB (004940.KS) from U.S. private equity firm Lone Star, but either it or Lone Star can terminate the deal after not getting regulatory clearance by a July 31 deadline.

HSBC said on Thursday it would make a further statement on its plans "when appropriate".

As the deadline loomed without sign of a deal, HSBC had been expected to push ahead with completing the deal at a later date, encouraged by a more accommodating South Korean government.

HSBC said in a brief statement: "We believe in the long term prospects for Korea, we have a good business there already, and wish to play a major part in the country's further development."

It declined to comment further.

A successful deal would be the biggest cross-border move in South Korea's banking sector and catapult HSBC into the ranks of the country's top local banks.