S. Korea to Ease Bank Ownership Rules

South Korea plans to allow non-financial firms to hold increased stakes in banks through private equity funds in order to speed up its drive for the privatization of state-owned lenders, the head of the financial watchdog said Wednesday.

"The government plans to ease limits on bank ownership through measures to minimize conflicts of interests," Jun Kwang-woo, chairman of the Financial Services Commission (FSC), said in a seminar, adding that industrial groups will be allowed to hold greater stakes in banks through private buyout funds.

Current regulations forbid a non-financial company from holding more than 4 percent of shares with voting rights in a bank, while financial firms are permitted to own up to 10 percent of a bank.

His remark came as the government of President Lee Myung-bak, who took office last month, has pledged to ease regulations on bank ownership and privatize some state-run lenders.

Supporters of eased regulations on bank ownership said the move would help the government find investors for stakes in state-run lenders including No. 1 financial services company Woori Finance Holdings Co., but critics say that easing restrictions will make it easier for conglomerates to add a bank to their holdings.

"The move does not means that conglomerates or chaebol will control banks and the FSC will step up supervisory capability to the level of advanced countries following eased rules," Jun added.

He also added the country plans to draw up measures to facilitate increased establishment of financial services companies. The move is designed to nurture global investment banks and larger holding firms focusing on insurance business, the FSC added.

Jun told in a news conference last week that the country plans to sell the state-run Korea Development Bank in 2009 after turning it into a holding company within this year. KDB has supplied and managed industrial capital to help develop local industries and fuel economic growth.

Currently, South Korea has four financial holding companies including Woori Finance. Under a holding firm system, it is easier for financial companies to seek more takeovers and develop and sell a wide range of financial products. (Yonhap)