Internet Banking
On Nov. 18, the National Policy Committee ordered a second legislative subcommittee to review a partial revision of the banking laws. The amendment is to partially ease the separation of finance and commerce so that conglomerates can set up internet-only banks and own a stake of up to 50 percent in them. However, the discussion is expected to face a bumpy ride in the future as the ruling party and the opposition are in sharp disagreement over the matter
Shin Dong-woo and Kim Yong-taek of the ruling Saenuri Party, who proposed the revised bill, said, “The current laws require high amount of capital and strictly ban non-financial companies from owning banks. However, it didn’t consider the characteristics of web-based internet banks. In order for internet-only banks to succeed, the government should allow potential participants with creativity and innovation, including ICT companies, to own internet banks. For internet-only banks, the capital requirement and regulations on the maximum stake of non-financial shareholder should therefore be relieved.”
According to the revision, the government should include the definition and regulations of internet-only banks in the banking laws, while reducing the minimum capital required to establish a commercial bank from the current 100 billion won (US$86.67 million) to 25 billion won (US$21.67 million) for only internet banks, which is the same for local banks. Also, it should relax the rules for separation of banking and commerce so that the maximum stake of a largest non-financial shareholder can be raised up to 50 percent from the current 4 percent. In a bid to prevent bad side effects from conglomerates managing internet banks, the government will ban the bank from granting of credit to the largest shareholder and the business group he belongs to. And, those who fail to do so will face a penalty of up to ten years in prison or a fine of up to 500 million won (US$433,351).
However, there has been a substantial divergence of opinion over the separation of banking and commerce between the ruling and opposition parties. The legislative subcommittee has faced with difficulties from the start. The ruling party members, who proposed the amendment, said, “This is not the deregulation of overall banking laws. It is for internet-only banks. So, conglomerates will not be able to use banks as their own coffers and financial public concern will not be hampered either, unlike the concerns of critics.” In contrast, the opposition members said, “Starting with internet banks, the deregulation of the maximum stake that non-financial shareholders can own will spread to all banks.”
Some also said that ICT companies, which want to participate in internet-only banks, can also abuse their authority even if it is not a conglomerate.