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| Financial Services Commission (FSC) Chairman Kim Joo-hyun speaks during a press briefing held at the government complex in central Seoul, Friday. Courtesy of FSC |
FSC to upgrade Korea's capital market regulations to global standards
By Anna J. Park
The Financial Services Commission (FSC), Korea's top financial regulator, has vowed to push forward to ease the country's long-held separation of industrial and financial capital during the first half of this year. It aims to open the gate for both local and global financial firms to extend further to non-financial businesses.
It is part of the FSC's 2023 policy direction goals reported to President Yoon Suk Yeol earlier this week. The FSC has set a total of 12 goals for this year; three of them aim at stabilizing and prepping local financial markets against risk factors; four of the goals focus on supporting both small business owners and the financially vulnerable from burdens of soaring interest rates. The last four goals center on improving and innovating the country's capital market systems and regulations to better suit global standards, while nurturing the local financial technology (fintech) industry.
As for easing the decades-long legal principle that separates industrial and financial capital, the top financial regulator said it will come up with specific measures to allow financial companies to have non-financial subsidiaries or to grant the expansion of their business scope during the first half of this year.
Since the early 1960s, the country's Banking Act has restricted financial companies from owning non-financial subsidiaries, while it also prevents non-financial companies from having stakes of more than four percent in local banks. The act has served to protect and guarantee the independence of financial companies against pressures from conglomerates. Yet the law is now considered obsolete, as legal frameworks and the financial sector have grown denser and more complex, making the rule an unnecessary burden. Since his inauguration in July last year, the FSC Chairman Kim Joo-hyun has voiced the need to reexamine the rule to promote further growth and innovation in the financial industry.
With such a stance, the FSC is contemplating opening doors for financial companies to make inroads into non-banking businesses while regulating the risks exposed to financial firms through such investments.
Currently, only a few financial firms are allowed to provide non-banking services to customers, such as KB Kookmin Bank's mobile virtual network operator (MVNO) service and Shinhan Bank's food delivery application, as exceptions granted by the financial authority. The FSC designated them as exceptional pilot programs for the sake of innovative financial service experiments.
If the separation officially allows regulation changes, banks will be allowed to make forays into non-financial IT services and various other businesses. The local financial firms have long complained that they suffer from an "uneven playing field," while big-tech companies enter the financial sphere, encroaching on market shares. They have been urging the financial authority to ease the separation rule.
Along with the expected change within the first half of the year, the FSC is planning to come up with a regulative framework for big tech's financial services during the third quarter of this year. The FSC explained that the regulating system will follow global standards on the matter and that it will focus on managing and preventing risks.
The top regulator also aims to support local financial companies' overseas businesses, as it plans to sell Korea's financial infrastructure systems, such as credit ratings and payment settlement systems. With the government-led infrastructure sale to foreign countries, the FSC aims to involve more local banks in the sale promotion.
At the same time, the top regulator aims to host more global financial companies by overhauling regulations, while providing various benefits in taxation, labor, or foreign currency-related assistance.
Meanwhile, the FSC also plans to support the fintech industry through consulting, capital supply, overseas business strategies and networking, and investment opportunities.
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