The Korea Times
amn_close.png
amn_bl.png
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
amn_bl.png
Business
  • Tech
  • Bio
  • Companies
  • World Expo 2030
amn_bl.png
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
amn_bl.png
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
amn_bl.png
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
amn_bl.png
Entertainment & Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
amn_bl.png
Sports
amn_bl.png
World
  • SCMP
  • Asia
amn_bl.png
Video
  • Korean Storytellers
  • POPKORN
  • Culture
  • People
  • News
amn_bl.png
Photos
  • Photo News
  • Darkroom
amn_NK.png amn_DR.png amn_LK.png amn_LE.png
  • bt_fb_on_2022.svgbt_fb_over_2022.svg
  • bt_twitter_on_2022.svgbt_twitter_over_2022.svg
  • bt_youtube_on_2022.svgbt_youtube_over_2022.svg
  • bt_instagram_on_2022.svgbt_instagram_over_2022.svg
The Korea Times
amn_close.png
amn_bl.png
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
amn_bl.png
Business
  • Tech
  • Bio
  • Companies
  • World Expo 2030
amn_bl.png
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
amn_bl.png
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
amn_bl.png
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
amn_bl.png
Entertainment & Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
amn_bl.png
Sports
amn_bl.png
World
  • SCMP
  • Asia
amn_bl.png
Video
  • Korean Storytellers
  • POPKORN
  • Culture
  • People
  • News
amn_bl.png
Photos
  • Photo News
  • Darkroom
amn_NK.png amn_DR.png amn_LK.png amn_LE.png
  • bt_fb_on_2022.svgbt_fb_over_2022.svg
  • bt_twitter_on_2022.svgbt_twitter_over_2022.svg
  • bt_youtube_on_2022.svgbt_youtube_over_2022.svg
  • bt_instagram_on_2022.svgbt_instagram_over_2022.svg
  • Login
  • Register
  • Login
  • Register
  • The Korea Times
  • search
  • all menu
  • Login
  • Subscribe
  • Photos
  • Video
  • World
  • Sports
  • Opinion
  • Entertainment & Art
  • Lifestyle
  • Finance
  • Business
  • National
  • North Korea
  • 1

    US urged to respect Korea's position amid US-China chip war

  • 3

    Chinese carmakers challenge Hyundai Motor, Kia in global markets

  • 5

    Calls grow for regulations on AI technology on webcomics

  • 7

    CJ, Shinsegae study temple food to expand vegan lineup

  • 9

    Mexico president eyes deals with China, Korea to combat fentanyl

  • 11

    Africa Day celebrated in Korea with book talk

  • 13

    Russia's Lavrov tells China envoy 'serious obstacles' to Ukraine peace

  • 15

    1 in 6 N. Korean children under 5 suffer from stunted growth: report

  • 17

    INTERVIEWKorean chef aims to change Hong Kong's dining scene

  • 19

    US diplomat to visit Korea for anti-proliferation meeting

  • 2

    Stray Kids, NCT's Taeyong, ATEEZ gear up for June releases

  • 4

    Korean culture as the solution

  • 6

    Temples celebrate Buddha's birthday

  • 8

    China, Korea agree to strengthen talks on chip industry: Chinese commerce ministry

  • 10

    Biden says debt default deal 'very close' while deadline now set at June 5

  • 12

    Synth pop regains popularity with K-stars, riding retro boom

  • 14

    ChatGPT: boon or bane for banking industry?

  • 16

    Tech leads more gains on Wall Street

  • 18

    Presidential office denies Japanese news report on Yoon's possible visit to Ukraine

  • 20

    Bernadou's travels in Korea in 1884 Part 4 - Gaeseong's passive defiance

Close scrollclosebutton

Close for 24 hours

Open
  • The Korea Times
  • search
  • all menu
  • Login
  • Subscribe
  • Photos
  • Video
  • World
  • Sports
  • Opinion
  • Entertainment & Art
  • Lifestyle
  • Finance
  • Business
  • National
  • North Korea
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
Mon, May 29, 2023 | 01:44
KoreaToday_
Lee to Ease Bank Ownership Regulations
Posted : 2008-01-30 22:39
Updated : 2008-01-30 22:39
Print PreviewPrint Preview
Font Size UpFont Size Up
Font Size DownFont Size Down
  • facebook
  • twitter
  • kakaolink
  • whatsapp
  • reddit
  • mailto
  • link


By Yoon Ja-young
Staff Reporter

President-elect Lee Myung-bak has emphasized that he would be a business friendly president, boosting investment through deregulation. Among his key pledges for conglomerates is the easing of bank ownership rules.

Currently, non-financial companies with over 2 trillion won in assets are banned from owning a 4 percent stake or over in a commercial bank. Introduced in 1984, it aims at preventing chaebol from using banks as their private coffers. The regulation is strict for banks as they are involved in savings and lending. Consequently, most big banks have shares owned by the government, individual investors or foreign funds.

With a number of other regulations limiting business capital from entering financial industry, the barrier has increased the stability of the economy, blocking the collapse of an industry from spreading to banks.

The call for the strengthening of this came after the Asian financial crisis, on the notion that conglomerates had used their financial subsidiaries as their private banks and their exorbitant expansion strategy on loans drove both the financial and non-financial sectors to collapse.

Calls for Scrapping the Barrier

However, some others have constantly demanded that the regulation be eased. According to a survey on 184 financial experts by the Federation of Korean Industries, a chaebol mouthpiece, 67.3 percent said the barrier should be either abolished or eased. Some 42.9 percent said it didn't contribute to the effectiveness of the financial market or the stability of the financial system, while 40.2 percent said it did.

They note that foreigners hold around a 70-percent stake in major local banks. Foreign funds have reaped enormous money by buying local banks after the Asian financial crisis. The U.S. Lone Star fund is estimated to make over 5 trillion won when it sells its stake in Korea Exchange Bank, and Newbridge Capital, a U.S. private equity fund, made 1.2 trillion won when it sold shares of Korea First Bank to the London-based Standard Chartered in 2005.

They say state-owned banks are likely to be bought by foreign investors as well when they get privatized, as the cash rich conglomerates are banned from owning banks. It will result in foreign funds reigning over the local financial industry.

Those calling for abolishing the barrier also say that it would help local banks grow into global players.

Stuck between developed countries equipped with better technologies and new emerging giants like China with cheap labor, the manufacturing sector is seeing profit margins fall.

The government has said that services sector, especially finance, should be a new growth engine. The financial sector, however, is lagging far behind, compared with the outstanding manufacturing.

According to The Banker, which measured the Trans Nationality Index (TNI) of 60 major global banks, Korea stood at 4.3, far lower than European banks with 46.1 or the U.S. banks at 22.6, and even lower than the Asian average of 16. This means the Korean financial industry has a long way to go to become global.

Those opposing the bank ownership rule argue that the competitive manufacturing sector, which has abundant capital, human resources, and global network, should be induced to invest in the financial industry. Easing of the rule would open the doors for capital to enter the financial sector and help it grow.

They also point out that the soundness of the industry has improved since the Asian financial crisis. The corporate governance structure has become more transparent and reckless lending is less likely.

``The (manufacturing) industry with global competitiveness has no reason to use a financial subsidiary as a private coffer since it can raise money more cheaply on the direct financing market, instead of local banks'' said Cho Dong-keun, a Myongji University professor, in a report published by the Center for Free Enterprise.

He said the regulation is a barrier that allows only half of the arena to be used, resulting in handing over most of the local banks to foreign capital. He called for the policy paradigm shift, from the segregation of business and financial capital to the fusion of the two.

As easing of the bank ownership regulation was one of Lee's main pledges, the transition team has said it will push for demolishing the barrier between banks and businesses step by step. It is likely to allow pension funds and consortiums of small and medium sized firms to own banks first.

Problems Linger on

The debate, however, isn't over. Opposition is still fierce regarding the plan.

The Solidarity for Economic Reform, a leading NGO, agreed with the President-elect when he pointed out the weakness in the financial industry. Lee has said he would induce development of the sector and job creation through deregulation.

The NGO, however, showed concern. ``The financial sector is the basic infrastructure of the market economy, which should not be accessed from outdated development policy perspectives such as the ones used to be applied to `infant industries' or `key industries' during the era of economic development,'' it said.

It said financial institutions' soundness and the transparency of financial transactions that thoroughly protect consumers' rights should come first for the development of the industry. According to the NGO, only four among the world's 100 largest banks have industrial capital as governing shareholder. Among OECD member countries, 48 percent regulate businesses from owning banks, ``The President-elect should keep in mind that it was not excessive regulation but government intervention not based on law that hindered financial industry development.''

There have been a number of cases that involved conglomerates running financial companies, in which the financial subsidiary was abused to boost the main business of the group. Hyundai Securities, for example, was once used to manipulate stock prices of Hyundai Electronics, which later went bankrupt. Financially weak businesses may use their financial companies to raise money to expand business anytime.

The NGO showed concern over the cap-easing plan as it doubted there could be perfect supervision on such reckless behavior. ``Financial supervision is still lax here compared with other developed countries, and the regulatory body has many problems in its capability to execute the law.'' It said arbitrary execution of law is the most serious problem.

The transition team is causing confusion with arbitrariness. Kwak Seung-jun, one of Lee's key advisors on economic policies at the transition team, said the top four conglomerates, namely Samsung, LG, SK, and Hyundai-Kia Automotive Group wouldn't be allowed to acquire banks even with the easing of the regulation.

chizpizza@koreatimes.co.kr

 
wooribank
Top 10 Stories
1ChatGPT: boon or bane for banking industry? ChatGPT: boon or bane for banking industry?
2Man arrested for opening airplane emergency exit during flightMan arrested for opening airplane emergency exit during flight
3Labor unions seek to attract migrant workers at shipyards Labor unions seek to attract migrant workers at shipyards
4Korea walks fine line between US, China in chip warKorea walks fine line between US, China in chip war
5Jeju-based shamanism researcher documents connection between humans, crows Jeju-based shamanism researcher documents connection between humans, crows
6POSCO named sustainability champion for 2nd consecutive year POSCO named sustainability champion for 2nd consecutive year
7[RAS KOREA] Preserving memories at Cheongju City Archives RAS KOREAPreserving memories at Cheongju City Archives
8Hyundai Steel receives EPD certification for low-carbon H-beam products Hyundai Steel receives EPD certification for low-carbon H-beam products
9Gov't moves to assist 3,400 Koreans stranded in typhoon-hit GuamGov't moves to assist 3,400 Koreans stranded in typhoon-hit Guam
105th Korean-German Energy Day5th Korean-German Energy Day
Top 5 Entertainment News
1Chun Woo-hee becomes chameleon con artist in 'Delightfully Deceitful' Chun Woo-hee becomes chameleon con artist in 'Delightfully Deceitful'
2Stray Kids, NCT's Taeyong, ATEEZ gear up for June releases Stray Kids, NCT's Taeyong, ATEEZ gear up for June releases
3[INTERVIEW] 'No more part-time jobs': VANNER talks about life after winning 'Peak Time' INTERVIEW'No more part-time jobs': VANNER talks about life after winning 'Peak Time'
4Competing to get married? 'Physical:100' writer to roll out marriage survival show Competing to get married? 'Physical:100' writer to roll out marriage survival show
5Ma Dong-seok goes all out to create iconic action hero in 'The Outlaws' threequel Ma Dong-seok goes all out to create iconic action hero in 'The Outlaws' threequel
DARKROOM
  • Turkey-Syria earthquake

    Turkey-Syria earthquake

  • Nepal plane crash

    Nepal plane crash

  • Brazil capital uprising

    Brazil capital uprising

  • Happy New Year 2023

    Happy New Year 2023

  • World Cup 2022 Final - Argentina vs France

    World Cup 2022 Final - Argentina vs France

CEO & Publisher : Oh Young-jin
Digital News Email : webmaster@koreatimes.co.kr
Tel : 02-724-2114
Online newspaper registration No : 서울,아52844
Date of registration : 2020.02.05
Masthead : The Korea Times
Copyright © koreatimes.co.kr. All rights reserved.
  • About Us
  • Introduction
  • History
  • Contact Us
  • Products & Services
  • Subscribe
  • E-paper
  • RSS Service
  • Content Sales
  • Site Map
  • Policy
  • Code of Ethics
  • Ombudsman
  • Privacy Statement
  • Terms of Service
  • Copyright Policy
  • Family Site
  • Hankook Ilbo
  • Dongwha Group