FSC's decision clouds K bank's future

Financial authorities halt review of KT's plan to raise stake in K bank

By Jhoo Dong-chan

K bank, the nation's first internet-only bank, is facing another hurdle in securing enough cash reserves to stay afloat.

The Financial Services Commission (FSC) said Thursday it has halted its review of KT's plan to raise its stake in K bank due to an anti-trust probe into the mobile carrier.

KT planned to raise its current 10 percent stake to 34 percent by participating in the internet-only bank's recapitalization slated for April 25. The capital increase is aimed at raising 592 billion won ($522 million), but the financial regulator's decision to sideline the mobile carrier is clouding the K bank move.

“On March 12, KT asked the FSC to review its plan to raise its stake in K bank, but the agency has decided to suspend the review because of a Fair Trade Commission (FTC) audit of KT's possible anti-trust law violation,” the FSC said in a press release Thursday.

Participating in the K bank consortium in 2017, KT has not been able to own more than 10 percent stake due to related laws of separation between industrial and financial capital.

The law prohibited an industrial firm owning more than a 10 percent stake, but the National Assembly passed a revision ill to raise the 10 percent stake to 34 percent last year, but only for internet banks last year.

KT immediately submitted a plan to raise its stake to 34 percent, but its effort has for now been thwarted by the FSC's decision because of the ongoing investigation.

Under a related act regarding internet-only banks, major shareholders of an internet-only bank should not violate financial laws, including anti-trust and tax laws in the previous five years.

If KT is acquitted, the FSC review will resume. Industry insiders say, however, the mobile carrier is likely to face a fine in the investigation.

The mobile carrier said it will appeal if it is found guilty by the FTC. If the matter leads to a legal battle, K bank won't be able to secure enough cash from KT for a while.

“KT won't be able to participate in K bank's recapitalization due to the FSC investigation,” said a K bank official.

“We are closely in talks with other shareholders to find new investors to replace KT.”

The FTC said last month it was investigating KT for alleged collusion in a government-issued business project.

Currently, Woori Bank has a 13.2 percent stake in K-Bank, KT has a 10 percent stake and NH Investment & Securities has a 10 percent stake.