HSBC has used a swing in the political mood in South Korea to request approval of its $6.3 billion (£3.2 billion) takeover of Korea Exchange Bank (KEB).

The deal has become a sensitive issue in South Korea, with the bank's owner, the Dallas-based private equity fund Lone Star, criticised for the tax-free profits the fund will make.

Regulators have refused to approve a buyer until related trials — which could drag on for years — conclude.

HSBC, which entered exclusive talks to buy Lone Star's 51 per cent stake in KEB in September, filed its application on Monday, two days before the pro-business Lee Myung Bak won the South Korean presidential election.

“We hope the regulators will consider the KEB acquisition issue independently from any other issues,” David Hall, HSBC's head of public affairs in Asia, said. “We believe the regulators will carefully review our application.”

Mr Lee, the President-elect, who will take office at the end of February, will establish a transition committee to advise him on economic affairs.

HSBC's exclusive negotiating agreement with Lone Star expires in April.

Foreign investment in Korea has dropped for three straight years, sparking concerns that the Lone Star issue was driving off potential investors.

A former government official and a former head of KEB are on trial for allegedly mis-stating the bank's financial woes in 2003, paving the way for Lone Star to buy it for $1.3 billion.

Although Lone Star is on trial over alleged price manipulation of KEB's credit card unit and is appealing against retroactive tax demands on earlier deals in Korea, it argues that a deal should still go ahead because it is not on trial over the actual bank sale.

A deal between Lone Star and Kookmin Bank, the largest lender in South Korea, fell through in 2006 because of the trials.

HSBC, expanding in Asia, has tried and failed three times to acquire Korean banks. Citigroup and Standard Chartered have both succeeded in local acquisitions.

However, regulators are believed to favour a Korean buyer.

Should a local bank merge with KEB, significant redundancies would be expected, but domestic lenders covet KEB's overseas branch network, the broadest of any South Korean bank.

Korea is anticipating a “Big Bang” in its financial markets with the implementation of the Capital Markets Unification Act from January 2009, and local financial institutions are consolidating.

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