According to the Financial Services Commission on July 23, it would allow financial service providers to offer multiple products in a single location.(image: Kobizmedia/Korea Bizwire)
SEOUL, July 25 (Korea Bizwire) – Ahead of a measure to relax regulations on barriers between different financial services such as banking, securities, and insurance, responses are mixed. Some large financial service firms with operations across multiple areas welcome the announcement while those that are not big enough fret that the measure would change the industry landscape completely as it favors consolidation.
According to the Financial Services Commission on July 23, it would allow financial service providers to offer multiple products in a single location. For example, a bank office will be able to sell insurance policies and make stock transactions. According to the plan, financial service firms will be permitted to share personal information within the same affiliate firms upon the consumer’s consent. Executives and managers of one firm may take a position in another within the same corporation.
That means the deregulation proposal is intended to encourage internal financial consolidation while retaining the current walls separating the banking, securities, and insurance business.
The plan is a godsend to several large operators like KB Financial Group, Shinhan Financial Group, and Samsung Life as it would help them save manpower cost while keeping the money coming out of bank accounts to invest in the stock market in the form of cash management accounts.
But it remains to be seen whether this would lead to the intended effects of better financial intermediation and higher profitability for some operators, or more risk in the financial system as seen in the 2008 global financial crisis introduced by the repeal of the Glass–Steagall Act in the late 1990s and lower financial service quality due to closure of many smaller competitors.
by Sean Chung (schung10@koreabizwire.com)
