A report from the Institute for Monetary and Economic Research, a think-tank sponsored by the Bank of Korea, South Korea’s central bank, has found that private equity funds have done little for the nation’s banking sector even as they have contributed to the country’s financial stability.

Due to this finding, the Institute has advised the South Korean government to only sell its stake in South Korean banks to other banks and not to private equity funds.

Public antagonism in South Korea toward US funds makes the report look like a further dig against foreign private investment funds, but in fact the report advises against selling to any private funds, domestic or foreign.

Much of the resentment toward such foreign funds has to do with the fact that when they sell their interests in South Korean banks, they very often handle the transactions through tax havens and therefore make very large profits and do not pay any tax on those profits to South Korea.

But the information set out in the Institute’s report makes it seem that the main issue is really cost efficiency, which is determined by a bank’s expenses over it’s assets.

This, despite the fact that the cost-efficiency data is presented in a form that sets foreign-controlled institutions versus domestically-controlled banks.

The report found that foreign-run banks improved their cost efficiency from 10.7 percent in 2000 to 9.8 percent in 2004, but that Korean-controlled banks improved efficiency even more, from 12.6 percent in 2000 to 8.3 percent in 2004.