By Kang Hyun-kyung
Staff Reporter
Leaders of the governing Grand National Party (GNP) and the largest opposition Democratic Party (DP) locked horns Thursday over who should control local banks.
GNP lawmakers argued that the current law governing bank control would result in foreign shareholders taking over bank governance, adding that the passage of a bill to allow conglomerates to own up to a 10-percent stake in banks, up from the current 4-percent ceiling, was inevitable.
DP lawmakers, meanwhile, rejected it, saying only conglomerates will benefit from the revision and banks will become their private coffers.
The governing and opposition parties agreed Tuesday to table the bill in a National Assembly session next month.
They agreed to deliberate and pass the bill only upon reaching an agreement. According to the accord, neither side can push for vote without consent from the other.
As the parties showed profound disagreement over the deregulation initiative, the ruling party must persuade opposition lawmakers before voting.
GNP Spokeswoman Cho Yoon-sun told reporters that the deregulation measure was designed to protect banks from possible foreign ownership.
A vast majority of shareholders in large-scale local banks, except Woori Bank, are foreign investors, Cho said.
``If the current 4-percent stake ceiling remains intact, foreigners will control local banks when the economy is good. But if the economy gets worse, taxpayers would shoulder the burden because the government will work on a massive bailout plan to help banks,'' she said.
The government came up with a 120-trillion-won bailout plan to rescue the economy after the Asian financial crisis hit the nation. Of the money, about 87 trillion won was spent to save local banks.
``DP lawmakers are arguing that the measure would end up allowing large businesses to own banks. But what we see is that all banks will be controlled by foreigners as long as the current law remains unchanged,'' Cho said.
The bill also stipulates that conglomerates can own banks through the so-called Private Equity Fund (PEF), a pooled investment vehicle used for investing in a variety of equity securities.
Opponents say bank shares tend to be dispersed among many shareholders and therefore the 10-percent stake is large enough for a conglomerate to control banks.
If this takes place, they say, banks will become private safes for businesses.
Proponents, however, contend that banks will become more globally competitive with investments from businesses.
GNP lawmaker Cho said businesses are known to have trillions of won available for investment in new business sectors.
``They are discouraged from seeking investments, not because of the economic downturn but because of the regulation-ridden business climate,'' she said.
Therefore, easing regulation would help corporate leaders find desirable business opportunities, Cho said.