SEOUL, Apr. 16 (Korea Bizwire) — South Korea’s top financial regulator said Thursday that he will relax regulations on bank ownership in order to pave the way for information technology firms to invest in the untouched Internet-only bank sector.
Under the current laws, an industrial company is banned from holding more than a 4 percent stake in a bank, and the company must have less than 2 trillion won in assets at the same time.
“It is time to consider lifting the restriction that draws a clear line between the industrial and financial sectors,” Financial Services Commission (FSC) Chairman Yim Jong-yong said during a Seoul conference. “The government is ready to remove the hurdle.”
He said the FSC will map out detailed guidelines before June and let industrial companies with high-end banking technology own an online-only bank within the year.
Officials said the FSC is considering raising the stake ceiling to about 30 percent to induce IT firms to invest in the financial industry.
An internet bank, or direct bank, is a bank that offers services remotely via online and telephone banking without brick-and-mortar offices or face-to-face channels. Such banking emerged in the 1990s with the advent of online banking technology.
Experts noted that South Korea has remained far behind the global trend due to the ownership ban.
In 2001, some large companies, including retail giant Lotte Group, had tried to set up a direct bank but failed to overcome the legal obstacle.
“The restriction rules out IT firms from the beginning,” said Suh Byung-ho, a researcher at the Korea Institute of Finance. “It’s necessary to relax the regulation to attract IT companies.”
Naver Corp. and Daum Kakao Corp., the country’s two biggest IT companies, are seeking ways to tap into the financial business, with Daum Kakao running mobile payment tools such as KakaoPay and BankWalletKakao.
“There should be a system to give nonfinancial players, including IT firms, chances to enter the banking sector if they have feasible business plans to improve the financial market and customer rights,” said Cho Jeong-rai, a lawyer at Bae, Kim & Lee LLC., a Seoul-based law firm.
But the lawyer said the financial authorities should build up their oversight functions to have the IT company-founded online banks maintain their financial health and prevent their parent company from using the banks as their cash cow.