Ruling, Opposition Parties Fail to Agree on Internet-only Bank Bill

The ruling and opposition parties failed to reach an agreement on a special bill on direct (Internet-only) banks, which involves the easing of the banking-commerce separation. As a result, the bill is unlikely to be passed in the plenary session of the National Assembly on Aug. 30.

When it comes to industrial capital’ shareholding ceiling in direct banks, the parties agreed to raise it from 10% to 34%. However, they failed to reach a consensus with regard to the application of the eased banking-commerce separation rules to ICT companies with at least 10 trillion won in assets.

The parties are going to discuss the matter in the future based on two compromise plans. “An agreement has been reached on one of the two major issues, that is, preventing direct banks from being used for private purposes by conglomerates, and we will discuss phrases related to conglomerate regulation down the road,” said Democratic Party lawmaker Jung Jae-ho, who is the ruling party secretary of the National Policy Committee.

The ruling party’s compromise plan is to apply the eased banking-commerce separation rules to ICT companies and ICT-centered conglomerates. The opposition parties’ plan is to specify requirements for direct bank establishment in the bill and prepare an enforcement ordinance to cover details, which consist of how to prevent economic power concentration, the minimum required degree of the ICT-centeredness, crime histories, and social credit.

The parties currently have split opinions on whether to allow ICT firms, such as Kakao, Naver, Nexon and Netmarble, to become major shareholders in direct banks. The ruling party and the Financial Services Commission are claiming that the deregulation should not be applied to large business groups with individual heads and at least 10 trillion won in assets with the exception of ICT-centered ones. According to their plan, so-called chaebol groups, such as Samsung, LG, Hyundai Motor, SK and Lotte, cannot run a direct bank without exception. At the same time, Kakao, which is running Kakao Bank, and Naver, which is expected to set up a direct bank soon, become subject to regulation. The goal of the party and the commission is to prevent the latter from occurring.

Meanwhile, opposition parties are claiming that the partial deregulation in favor of such ICT companies is a special favor for Kakao in the end and every company should be able to benefit from less strict banking-commerce separation rules. “Whether a company is an ICT firm or not is just a classification by Statistics Korea, and the subjective grouping is incompatible with the legal system,” they said.