By Jhoo Dong-chan
Ninety-seven financial firms affiliated with large business groups will face tighter scrutiny over inter-subsidiary dealings and other transactions, the financial regulator said Tuesday.
The Financial Services Commission (FSC) said it will force insurers, brokerages and other financial units of conglomerates to ease intra-affiliate transactions and bolster their capital. They could also be ordered to dispose of shares in their subsidiaries.
Aiming to prevent the nation's chaebol from exploiting their financial affiliates to secure cash injections, the FSC is drafting a new bill that includes related regulations.
The bill will be finalized in June after undergoing a public comment period in April and May.
The 97 affiliates from five conglomerates including Samsung, Hyundai Motor, Hanwha, Lotte and DB, as well as Mirae Asset Daewoo and Kyobo Life Insurance are expected to be affected by the new law.
"The chaebol's long cross-shareholding practice has often been subject to public criticism for their vulnerable ownership structure to foreign capital," said a Nomura Securities analyst.
"The government has shown its will to change the game. Now, it's time for the chaebol to improve their corporate structure while eradicating habitual intra-affiliates practices."
Complying with the government's long demands to root out their circular shareholding practice, Hyundai Motor Group has already announced a plan to improve its heir ownership structure.
The nation's largest carmaker said last week that the plan will place its affiliate Hyundai Mobis at the top of the group's corporate ownership structure while dividing the auto parts maker into two divisions _ the investment/key and module/after-services divisions.
The latter will be merged with Hyundai Glovis while Hyundai Motor Group Chairman Chung Mong-koo and his son Eui-son will sell their shares of Glovis to purchase shares of Mobis owned by other affiliates under the plan.
"The decision will root out the group's long circular shareholding practices," Hyundai Motor Group said.
"The group's plan to reform its ownership structure will require Chung and his son to pay more than 1 trillion won ($945 million) in transfer income tax. Hyundai Motor Group will continue meeting its social responsibilities."
The nation's largest conglomerate Samsung Group is also required to reform its management structure under the new bill, which may include selling Samsung Electronics shares owned by Samsung Life to remove its circular structure.
Ninety-seven financial firms affiliated with large business groups will face tighter scrutiny over inter-subsidiary dealings and other transactions, the financial regulator said Tuesday.
The Financial Services Commission (FSC) said it will force insurers, brokerages and other financial units of conglomerates to ease intra-affiliate transactions and bolster their capital. They could also be ordered to dispose of shares in their subsidiaries.
Aiming to prevent the nation's chaebol from exploiting their financial affiliates to secure cash injections, the FSC is drafting a new bill that includes related regulations.
The bill will be finalized in June after undergoing a public comment period in April and May.
The 97 affiliates from five conglomerates including Samsung, Hyundai Motor, Hanwha, Lotte and DB, as well as Mirae Asset Daewoo and Kyobo Life Insurance are expected to be affected by the new law.
"The chaebol's long cross-shareholding practice has often been subject to public criticism for their vulnerable ownership structure to foreign capital," said a Nomura Securities analyst.
"The government has shown its will to change the game. Now, it's time for the chaebol to improve their corporate structure while eradicating habitual intra-affiliates practices."
Complying with the government's long demands to root out their circular shareholding practice, Hyundai Motor Group has already announced a plan to improve its heir ownership structure.
The nation's largest carmaker said last week that the plan will place its affiliate Hyundai Mobis at the top of the group's corporate ownership structure while dividing the auto parts maker into two divisions _ the investment/key and module/after-services divisions.
The latter will be merged with Hyundai Glovis while Hyundai Motor Group Chairman Chung Mong-koo and his son Eui-son will sell their shares of Glovis to purchase shares of Mobis owned by other affiliates under the plan.
"The decision will root out the group's long circular shareholding practices," Hyundai Motor Group said.
"The group's plan to reform its ownership structure will require Chung and his son to pay more than 1 trillion won ($945 million) in transfer income tax. Hyundai Motor Group will continue meeting its social responsibilities."
The nation's largest conglomerate Samsung Group is also required to reform its management structure under the new bill, which may include selling Samsung Electronics shares owned by Samsung Life to remove its circular structure.
