Bill Sought for Corporate Control of Banks
By Park Hyong-ki
Staff Reporter
While policymakers are divided over the rules banning non-financial firms from controlling banks, a lawmaker plans to propose a bill to scrap the existing laws distancing the industrial and banking sector.
Shin Hak-yong, an independent lawmaker, said Wednesday that he will submit bills designed to boost the flow of industrial capital into the banking sector to the National Assembly this month. The lawmaker aims to get the bills passed at the Assembly by September.
``For the development of the banking industry, it needs capital from the non-banking industrial sector,'' said Shin.
He added that restrictions on non-financial firms were reverse discrimination in favor of foreign capital which has secured major stakes in a number of top domestic banks.
His move comes as the nation is preparing to privatize Woori Financial Group, which could fall into the hands of foreign investors whose presence is rising fast in the financial market here.
Financial Supervisory Commission Chairman Yoon Jeung-hyun has long argued that the restriction banning conglomerates from becoming major shareholders in banks should be lifted for the growth of the financial market. ``It is foolish to nail down the use of industrial capital,'' he recently said.
Currently, a non-financial firm cannot hold more than a 4 percent stake in a bank, a move designed to block banks from being used as private coffers for big companies. Practically, small or medium-size firms cannot invest in a bank to secure a controlling stake because of costs, while the rules are aimed at blocking conglomerates from controlling banks.
``It's a dilemma since there are not enough funds held by domestic financial firms to acquire Woori, although they should be separated in principle,'' said Park Dong-chang, a researcher at the Korea Institute of Finance.
Park added that the government should at least allow the allocation of corporate funds to banks especially for overseas venture.
Although there are concerns that corporations might use banks' money for their own purposes, some analysts say industrial capital can help internationalize local banks.
``The restriction should be somewhat eased for investment flexibility,'' said Shim Kyu-sun, CJ Investment & Securities.
He said that any negative impact from the relaxation of the rule can be offset by advanced supervision or a monitoring system.
Korean banks only operate 3.4 percent of their businesses abroad, while UBS' overseas operations account for 70.5 percent; HSBC for 48.1 percent; and Citi Bank, 33.1 percent as of last year, according to the Financial Supervisory Service.
Only two domestic financial firms are ranked among the top 500 companies worldwide, and Korea's financial industry only accounts for 7.5 percent of its gross domestic product, far less than the United Kingdom and the United States.