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KT’s hopes for K bank hit a snag

Plan to expand its investment suspended due to FTC probe

Apr 08,2019
KT, a major shareholder in K bank, is facing stumbles as it hopes to become the largest shareholder in the financially struggling internet-only bank.

KT, the country’s second largest mobile carrier, filed an application to become the top shareholder in K bank last month, but the outcome is in doubt due to unraveling allegations of unfair business practices.

Multiple media outlets reported earlier this week that the Financial Services Commission, the country’s financial regulator, decided to suspend the screening process because KT is under investigation by the Fair Trade Commission.

The antitrust agency is working on a follow-up probe on KT’s price-fixing case from 2016. The telecom was fined 700 billion won ($615 million) for violating the Fair Trade Act.

The FSC, however, issued a statement saying that “[The FSC] is reviewing the application and nothing has been decided.”

The supervision guidelines for the banking sector allow the FSC to suspend the qualification process when a separate investigation is carried out by financial authorities, including the FSC, the Financial Supervisory Service and the National Tax Service.

Even if the FSC goes ahead with the screening, the 2016 case itself could dim the prospects for its approval.

A new law stipulates that a company with a record of violating the Fair Trade Act is not eligible to become the largest shareholder of an internet-only bank for five years after its most recent violation.

Those rules send an alarming signal to K bank, since the bank has a lack of capital for lending services and cash reserves.

K bank is eagerly awaiting KT’s expanded role in raising capital, since other shareholders have been reluctant to finance the bank.

KT will be allowed to lift the limit on capital increases only when it becomes the largest shareholder of K bank. It currently holds a 10-percent stake in the bank due to a previous regulation that bans non-financial companies from holding more than a 10-percent share in a bank.

But the telecom player is now entitled to apply for an extended holding after the National Assembly passed a reform bill that allows nonfinancial companies whose ICT business accounts for 50 percent of their assets to raise their stakes within the banks to 34 percent.

KT declined to comment on the issue, saying that the investigation is underway.

Rival Kakao Bank is also looking for IT company Kakao to pass the screening, as the internet company applied for the verification procedure earlier this month.

Still, Kakao faces the same problem as KT, since it paid a 100-million-won fine for violating the Fair Trade Act in 2016.

But a source at the company said that the company is unlikely to face an immediate financial risk.

“The current top shareholder, Korea Investment Holdings, has proven record of financing Kakao Bank and we are not worried about serious financial problems,” the source said.


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


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