South Korea has authorized Newbridge Capital Ltd. to buy a 51% stake in Korea First Bank, breaking a stalemate between the country's finance ministry and foreign investors.

Newbridge, a U.S.-based investment fund in which GE Capital Corp. holds a small stake, will pay $417 million for the stake, ending nine months of on-and-off talks.

The deal comes three weeks after HSBC Holdings PLC pulled out of a similar deal to buy a 70% stake in SeoulBank for $900 million, after failing to agree with the South Korean finance ministry over the value of the bank's portfolio.

Major Korean banks ran into difficulties after a lending binge to big national corporations, known as chaebol, triggering a major financial crisis. Under a deal with the International Monetary Fund, South Korea last year agreed to revamp its banking laws and allow foreign investors in as a precondition to billions of dollars in financial assistance.

Foreign banks have been keen to get into local retail and business lending but have so far only be allowed to acquire minority stakes in Korean banks.

Germany's Commerzbank AG, for example, acquired a 30% stake in Korea Exchange Bank and Goldman, Sachs & Co. acquired a 17% stake in Kookmin Bank in May. Amsterdam-based ING Group has acquired a 10% stake in Housing and Commercial Bank. -- James R. Kraus

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