Seoul Says Finance Curbs Will End

In a welcome move for financiers, the government said it would drop many restrictions on financial products.

"Financial products should be developed by financial institutions and evaluated by investors," Deputy Prime Minister Jin Nyum told JoongAng Ilbo recently. "We will start a comprehensive review of various restrictions and abolish those that hinder development of new products."

The move to liberalize the financial sector is aimed at furthering the growth of the industry. "Financial institutions have made progress in downsizing and in reducing bad loans, but it is hard to say whether they have become more competitive," a Finance Ministry official said.

The ministry said its review of the market would include the effects of restrictions that limit the maturities of insurance plans, restrict the management of assets in trusts and regulate the development of products that combine characteristics of different types of financial services.

A researcher at the Korea Institute of Finance, Kim Byoung-yun, said current regulations are "affirmative in nature, as the government only lays out which products the financial firms can market." This has made financial firms stay away from products that are not specifically allowed by the financial regulator, he said. It is a "fine line" for the government to keep restrictions to a minimum while ensuring that investors are not hurt by shady financial products, he added.

A fire insurance company recently encountered a regulatory roadblock when it was set to begin marketing policies with unlimited terms that would compensate for accidents and illnesses. The Financial Supervisory Service blocked the launch, saying that the product would infringe on the domain of life insurance companies.

Other restrictions deter the development of more flexibly managed products, industry officials said. "We would like to put out more products that would maximize the expected return to investors," an official with a commercial bank said. "But the government has been clearly more concerned about possible problems that new products may have."

by Song Sang-hoon