Reps take up K bank inquiry

Choi Heung-sik, head of the Financial Supervisory Service, answers lawmakers’ questions during a legislative audit Tuesday at the National Assembly. [YONHAP]

A routine legislative audit of the country’s financial regulators has become a major flash point as lawmakers are raising doubts about the approval process of Korea’s first internet bank.

Lawmakers from the Democratic Party have been pressing financial authorities on whether the former administration under Park Geun-hye, who was in the opposing party, unfairly pushed for the opening of K bank even though the bank’s key stakeholder failed to meet regulatory criteria.

Rep. Park Yong-jin said the Financial Services Commission, the country’s top regulatory body, pushed ahead the approval despite doubts from the country’s financial watchdog, the Financial Supervisory Service.

The lawmaker recommended referring the case to the Board of Audit and Inspection.

The point of contention lies in a law that requires the main shareholder of an internet bank have a BIS capital ratio above the market average. Woori Bank’s ratio during the second quarter of 2015 was reportedly 14.01 percent, while the average for Korean banks that quarter was 14.08 percent.

The internet bank screening took place in the third quarter that year, and the Financial Services Commission concluded that Woori Bank met the standard when counting the average ratio over the past three years, but the Financial Supervisory Service disputed the decision, saying the interpretation deviates from a regulatory clause that requires the ratio from the latest quarter be used.

“If [the Financial Services Commission] arbitrarily recognizes different standards,” Park said, “banks can submit varying standards.”

After the Financial Services Commission gave K bank the green light, the agency removed the clause dictating that the latest quarterly results be used.

Choi Jong-ku, the new chairman of the commission who took office after Moon Jae-in was elected president, admitted the procedure under his predecessor was far from transparent during a questioning session with lawmakers on Monday.

“It was a practice in the industry to count quarterly ratios,” Choi said, “But it became controversial after the Financial Services Commission took into account the rate over the past three years.”

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]