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Japanese, Chinese Capital Exerting Increasing Influence in Korean Financial Industry
Yen, Yuan Influx
Japanese, Chinese Capital Exerting Increasing Influence in Korean Financial Industry
  • By Cho Jin-young
  • February 2, 2015, 09:15
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Foreign capital is expanding its scope of business in Korea to banking, insurance, and securities as well as lending and savings banking, with their Korean counterparts bound by restructuring and the separation between banking and commerce.

As of the end of last year, savings banks with Japanese major shareholders accounted for 19.8 percent of the total assets in the savings banking industry, while the number of such banks was just five out of 86. SBI Savings Bank’s total assets amounted to 3.8 trillion won (US$3.45 billion) at the end of last year, equivalent to 10 percent of the market. It is Japanese capital that is currently dominating the domestic lending business, too. Apro Financial’s lending balance adds up to over 2 trillion won (US$1.8 billion), and Sanwa’s is 1 trillion won (US$907 million).

In the meantime, SBI Savings Bank is expected to acquire Woori Bank this year. During the preliminary bidding that failed late last year, China’s Anbang Insurance Group was the only one that submitted a written proposal.

The securities industry is no exception, either. Orix has been selected as the preferred bidder for the sale of Hyundai Securities. Orix is currently running OSB Savings Bank with assets of 1.159 trillion won (US$1.051 billion). It took part in the bidding for LIG Insurance last year. Yuanta Securities of Taiwan took over Tong Yang Securities last year, and China’s Fosun Financial Group has been found in a series of tenders for securities firms and insurers.

Under the circumstances, concerns are rising over the increasing influence of foreign capital, because others like Lone Star, Citibank, and SC Bank have been rather disappointing.

For example, Standard Chartered Financial Holdings has been criticized for its payout ratio of as high as 29.9 percent to 83.8 percent between 2010 and 2013, while Citibank Korea, which took over Hanmi Bank in 2004, reported service expenses of 1.2185 trillion won (US$1.1054 billion) between 2004 and 2014, with 774.1 billion won (US$702.8 million) of it estimated to be paid abroad. SC Bank has paid approximately 180 billion won (US$163.2 million) in overseas service expenses each year since 2010, too. Lone Star, which took over 4 trillion won (US$3.6 billion) through the acquisition and disposal of Korea Exchange Bank, is a typical example of the outflow of national wealth by a foreign financial power.