KB, Shinhan to set up holding companies in Indonesia

KB Financial Group headquarters in Seoul's financial district of Yeouido / Couresty of KB Finnacial Group

The two largest financial groups in Korea — KB and Shinhan — will each create a holding company that will oversee their respective businesses in Indonesia, industry officials said Tuesday.

KB Financial Group has nine subsidiaries in Indonesia, and Shinhan Financial Group has three.

The holding companies will be set up according to guidelines from the Indonesian Financial Services Authority, also known as OJK.

And the end of 2024, OJK implemented a regulation requiring foreign financial firms operating in Indonesia to establish a holding company if they meet certain criteria.

The details concerning the criteria were not available.

KB Financial Group and Shinhan Financial Group are subject to this regulation among the Korean businesses in Indonesia, industry officials explained.

“OJK correspondingly asked the two Korean financial groups to submit a plan on establishment of a holding company by June 23,” an official said.

He went on to say, “OJK will provide feedback within two months after it receives the plan, and once the plan is finalized, KB and Shinhan will be required to launch holding companies within the next 12 months.”

The two financial groups are expected to choose one of two types of holding companies.

Shinhan Financial Group headquarters in central Seoul / Courtesy of Shinhan Financial Group

The first one is an operating holding company, which is led by the largest of all business units owned by a conglomerate. Such a holding company will control lesser-sized peers as subsidiaries while sustaining its own business.

The second one is a non-operating holding company, which solely serves as a holding entity without directly intervening in the operation of its controlled firms.

A KB Financial Group representative, who asked not to be named, said the company “is carefully analyzing the pros and cons of the two options."

"We will make a decision after considering strategic goals and operational efficiency,” he said.

In the meantime, industry officials deemed that KB Financial Group will opt for a non-operating holding company.

This is because the main subsidiary in Indonesia, KB Bank, struggles with net losses, suggesting that it is not likely to properly function as a holding company until its operation is stabilized.

Also asking not to be named, a Shinhan Financial Group representative said the company “will share its expertise for a holding company to fully oversee the Indonesian business.”

For Shinhan Financial Group, an operating holding company is considered viable as its banking subsidiary is profitable and stable enough to oversee two smaller subsidiaries — one each from the credit card and securities sectors.