By Yoon Ja-young
Staff Reporter
The bank ownership rule is adrift at the National Assembly, where bickering between the governing and opposition parties over controversial bills has sparked ugly scenes.
Among the most sensitive issues pending at the National Assembly is bank ownership.
The government and the governing Grand National Party (GNP) are trying to ease the bank ownership rule. It aims at easing restrictions on pension funds and private equity funds, as well as conglomerates like Samsung Group, in holding shares of banks. They expect conglomerates deviated toward the manufacturing sector to find new growth engines in the financial industry.
Currently, the banking law restricts industrial capital from holding a major stake in banks ― they can hold only 4 percent. Those supporting easing of the cap argue that local banks would have been able to better cope with the financial crisis if they could have bolstered capital from industrial investors. There has also been a nationalistic stance that local banks are being handed over to foreign capital, as local conglomerates are restricted from buying banks. Currently, foreign investors are major shareholders in local banks.
They say that the restriction is excessive compared with other developed countries.
``The tax infused to banks that went bad during the Asian financial crisis amounts to 87 trillion won. However, all of them, except for Woori Bank, have over half of their stakes held by foreigners,'' said GNP spokeswoman Cho Yoon-sun, a former Citi Bank executive.
She said that taxpayers' money doesn't currently have to be spent on banks if local businesses are allowed to invest in banks.
However, it isn't likely to get approval easily given its controversy, with many pointing out possible side effects. According to a survey by the main opposition Democratic Party, it was rated the second most controversial bill. Coalition for Economic Justice, a leading NGO in the country, picked it as one of the 10 worst bills that should be abrogated at the National Assembly. It is also sensitive as it involves the governing structure of Samsung Group.
Critics fear that banks are likely to turn into private cashboxes of conglomerates. Despite the small stake, they might rule banks through a circular shareholding system. When a subsidiary of a chaebol goes bad, the financial company that gave the loan to the business could also have trouble and those who deposited money at the bank would be negatively affected as well.