Financial authorities seek to break banking industry's oligopoly

Financial Services Commission Chairman Kim Joo-hyun, right, speaks during a meeting with financial group leaders at the headquarters of the Korea Federation of Banks in central Seoul, Wednesday. From left are KB Financial Group Chairman Yoon Jong-kyoo, Financial Supervisory Service Governor Lee Bok-hyun and Kim. Yonhap

Measures announced to bring more competition into banking sector

By Anna J. Park

Korea's top financial regulator has vowed to lower entry barriers to the local banking industry by expanding accreditations of banking licenses to competent new players, a measure aimed to foster healthy competition in the local banking sector.

Financial Services Commission (FSC) Chairman Kim Joo-hyun announced, Wednesday, the outcome of five months of taskforce meetings on improving banking management practices. The financial authorities have held over 15 taskforce and working-level meetings since February to draw up measures to break the current de facto oligopoly in the domestic banking industry.

“The core of the new measures lies at strengthening fair and effective competition,” the FSC chairman said during Wednesday's meeting with major financial group leaders. “What prompted the introduction of further competition into the industry was a prevalent public view that banks make easy profits due to limited competition, while lacking efforts to innovate themselves to advance into global financial institutions.”

Expanding approvals of banking licenses to new players will come at various fronts. First, banks will face eased requirements in upgrading their status. For instance, regional banks' transition into nationwide commercial banks will become less strict, while savings banks' changeover to regional banks will also be easier.

Financial companies that are operating non-banking business can also apply for banking licenses anytime, as long as they meet relevant requirements. The evaluations for granting accreditations will be made year-round so that new players can enter the banking sector anytime.

The loan markets will also see heightened competition. The financial authorities will allow online loan exchanges for mortgage products by the end of this year, in addition to loan exchanges for credit loans.

Financial Services Commission Chairman Kim Joo-hyun, right, and Financial Supervisory Service Governor Lee Bok-hyun, center, walk into the meeting room at the headquarters of the Korea Federation of Banks in central Seoul, Wednesday. Yonhap

At the same time, the financial authorities pledged to ease regulations on the country's financial holdings companies.

“It's true that financial holding companies have had various constraints in assuming their role to suggest medium- and long-term growth strategies of their financial groups and to create synergy among their subsidiaries,” the FSC chief said.

He pointed out that financial holding companies have had excessive limits on their scope of business, while cooperation in terms of data and tasks among subsidiaries of financial groups has also been overly restricted. He vowed to come up with measures to improve such limitations in the near future.

“The harmonious combination of strengthened competition in the banking sector, transition to digital economies, financial firms' innovation and eased regulations on financial holding companies will help Korean financial companies smoothly develop into global players,” Kim said.

The financial authorities said they would push through follow-up procedures for Wednesday's announcement in the coming months. If law revisions are needed, they plan to come up with new rules promptly after holding consultations with related institutions.

Participants to the meeting between financial authorities and financial group leaders stand at the headquarters of the Korea Federation of Banks (KFB) in central Seoul, Wednesday. From left are Woori Financial Group Chairman Yim Jong-yong, Hana Financial Group Chairman Ham Young-joo, KB Financial Group Chairman Yoon Jong-kyoo, DGB Financial Group Chairman Kim Tae-oh, Financial Supervisory Service Governor Lee Bok-hyun, Financial Services Commission Chairman Kim Joo-hyun and KFB Chairman Kim Kwang-soo. Yonhap