South Korea’s President Moon Jae-in speaks in a meeting in Seoul on Aug. 7, to discuss Korea’s internet banking regulation. [Photo by Kim Jae-hoon]
South Korean President Moon Jae-in has proposed easing bank ownership regulations for non-financial businesses, a move that may increase access to fresh capital for the country’s internet-only banks that need ammunition for further growth.
Under Korean banking law, a non-financial firm cannot own more than 10 percent in a bank, with voting rights limited to 4 percent. The regulation was imposed to prevent conglomerates from using the bank reserves like their personal safe.
“The principle that non-financial companies are separated from banks should remain intact but if this regulation is hindering the growth of new businesses, a new approach is needed,” said Moon at an event on the deregulation of online banks held at Seoul City Hall on Tuesday. “While staying true to the big principle, we need to give internet banks room to grow.”
A bipartisan economic taskforce composed of the three major political parties - the ruling Democratic Party and the opposition Liberty Korea Party and Bareun Party - also held a meeting on Tuesday and agreed on loosening the bank ownership rules.
The regulation has been pointed out as a major obstacle to the flourishing of internet banks in Korea. In April 2017, K Bank kicked off operation as the country’s first internet-only bank without brick-and-mortar presence. Kakao Bank was launched three months later, backed by Korea’s leading mobile messenger operator Kakao Corp.
The two banks have shown impressive growth in just a year, with their combined user base now reaching 7 million and loans totaling 8 trillion won ($7.15 billion). But they face fund-raising problems due to ownership limitations from the banking law.
Last month, K Bank ended up raising only 30 billion won in a rights offering, one-fifth its original plan, due to disagreement among its many shareholders. The bank’s ownership is currently scattered across 20 companies, including three major shareholders Woori Bank, KT and NH Investment & Securities.
The major shareholder of Kakao Bank is Korea Investment & Securities, which owns a 58 percent stake. Kakao’s ownership is limited to 10 percent due to the regulation.
By Kang Gye-man and Kim Hyo-jin
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]