Assembly Panel Passes‘Big Bang’Bill
By Yoon Ja-young
Staff Reporter
The Capital Market Consolidation Act is expected to pass the Finance & Economy Committee at the National Assembly soon, which is expected to ignite a ``big bang'' in the financial industry.
The Ministry of Finance & Economy (MOFE) said Thursday that it had reached an agreement with the Bank of Korea on a measure allowing securities firms to join the retail payment service system, and reported it to the Finance and Economy Committee at the National Assembly which will examine financial bills, Thursday and Friday.
The committee at the National Assembly is expected to approve the bill during the two-day meeting ending Friday. It will then be discussed at the aggregate Finance & Economy Committee, Legislation & Judiciary Committee, and then at an extraordinary session of the National Assembly this month.
Following the ministry and the central bank reaching an agreement over the biggest obstacle in the Capital Market Consolidation Act _ whether to allow the securities firms to join the retail payment system or not _ the act is expected to make a smooth journey through the National Assembly.
The act is an ambitious blueprint for the financial industry by the government, which aims at transforming the country into a regional financial hub and securing a new growth engine. Despite being the 11th largest economy and one of the top manufacturers in a number of high-end goods, Korea's financial industry has lagged behind its competitors.
Meanwhile, a number of countries, including the United Kingdom, Australia, Singapore and Hong Kong, have successfully gone through financial market restructuring programs, and became major players in the global financial industry.
The act, which encourages innovation and competition through deregulation, features a scrapping of the walls between various financial industries. It is expected to be a major opportunity for securities firms, as they could transform themselves into investment banks like Goldman Sachs engaging themselves not only in brokerage services but also in asset management, investment consulting and futures and derivatives. Securities firms, or financial investment companies, will be one of the three pillars of the financial industry along with banks and insurers.
It also adopts negative system in regulation, allowing any kind of financial product as long as it isn't on a banned list, instead of the current positive system which defines the kinds of the financial investment products. It means customers will have a wider variety of financial products to choose from.
It will also allow securities firms to provide a retail payment system, with which customers will be able to pay various utilities and credit card bills or withdraw cash from their securities accounts. Banks, which already had customers transferring their assets from low interest rate bank accounts to securities firms' CMAs, have been fiercely opposing the measure.
The Ministry of Finance & Economy and the central bank, however, finally agreed to allow the securities firms to use the banks' settlement system on commission, to equip the brokerage firms with the retail payment services.