Ruling Party, FSC Differ on Details
With the National Assembly scheduled to consider a special law on internet-only banks to ease the separation of banking and commerce, South Korea’s financial regulator is pushing for a new revision bill that exceptionally allows information and communication technology (ICT) companies to become a major shareholder of internet-only banks even if their assets exceed 10 trillion won (US$8.93 billion).
However, it remains to be seen whether the new revision bill can get endorsement from the ruling Democratic Party, which differs from the Financial Supervisory Commission (FSC) over details, such as the share ownership limits and the range of exceptions related to the banking-commerce separation rule.
The FSC has recently submitted a revised bill to the National Policy Committee of the National Assembly.
Under the current law on banking, a nonfinancial entity is banned from owning more than 4 percent of voting stocks and 10 percent of non-voting shares in an internet-only bank. The FSC’s initial bill proposes that the ownership limits be raised to 34 percent of voting shares and 50 percent of non-voting shares. However, the bill also proposes that the higher limits be not applied to conglomerates with assets over 10 trillion won (US$8.93 billion), regardless of whether they are governed by an owner or not. This was aimed to prevent chaebol groups from participating in internet-only banks.
However, the FSC’s new revision bill proposes that ICT companies, even when their assets exceed 10 trillion won, be allowed to own up to 34 percent of voting shares and 50 percent of non-voting shares. In this case, ICT firms with an asset of over 5 trillion won (US$4.47 billion) would be allowed to become the largest shareholder of an Internet-only bank. Such companies include Kakao Corp. whose assets amount to 8.5 trillion won (US$7.59 billion), Naver Corp. with 7.1 trillion won (US$6.34 billion), Nexon Co. with 6.7 trillion won (US$5.98 billion), and Netmarble Games Corp. with 5.7 trillion won (US$5.09 billion).
KT Corp., the nation's top broadband Internet operator with an asset of over 10 trillion won (US$8.93 billion), would also be allowed to increase its stakes in an Internet-only bank. However, the company cannot increase its stake in the bank to more than 10 percent because it has violated the fair trade law before.
In this regard, the People's Solidarity for Participatory Democracy said, “The idea came up in the process of finding a way to all Kakao to become the largest shareholder of the Kakao Bank. The FSC initially said that chaebol would not be able to own an internet-only bank and then changed its stance, saying that chaebol with a practical ruler cannot do that. Now, it changed its stance again, saying that chaebol with a practical ruler cannot own the bank but ICT companies are not excluded. The industries to be allowed can greatly vary depending on how to determine the criteria for classification to define ‘ICT companies.’”
The members of the Democratic Party had the different ideas on the limit of stock ownership in internet-only banks and the range of exceptions at the general meeting on the 20th. After the general meeting of the members, Kang Byung-won, floor spokesman of the Democratic Party, said, “We agreed that the limit of stock ownership by industrial capital in the banks can be between 25 percent and 34 percent for the special law on internet-only banks.” He said that the limit will be decided between 25 percent of the proposal by Park Young-sun, a hard-liner of the party, and 34 percent of the proposal by Jung Jae-ho, who is at the Maginot Line of the party. However, the clash is expected as the ruling party is still divided over the issue.
Meanwhile, the ruling party and the opposition party are planning to pass the special law on internet-only banks after the meeting of the Legislation and Judiciary Subcommittee on the 24th, the meeting of the National Policy Committee on the 27th and the National the Assembly plenary session on the 30th.