Financial Regulations to be Eased for Internet-primary Banks

The Korean government is looking to relax banking-commerce separation regulations for Internet-primary banks, referring to Japan's example.

In 2000, the Japanese government allowed non-financial institutions to own 20 percent or more of bank shares so that industrial capital can set up Internet-primary banks. Since then, Japanese Internet-primary banks have grown at a very fast pace.

In 2001, major Korean corporations such as SK Telecom, Lotte, and KOLON attempted to establish such banks with about 20 venture firms like AhnLab. However, their plan was foundered by the Banking Act stipulating that the same requirements, including a shareholding limit of 4 percent, have to be applied to both Internet-primary banks and general commercial banks.

Once the limit is raised by up to 20 percent, establishing Internet-primary banks can gain significant speed. Financing hurdles can be dealt with as well, if capital requirements are eased.