[FOUNTAIN]Both orange, but they’re very differentMany American banks do not have the word, “bank,” in their official name. The corporate names of Citibank and Bank of America clearly state that they are banks, but Wells Fargo and Company and JP Morgan Chase and Co. do not clarify the type of business in their names. In contrast, all Korean banks’ names include the word.
In the United States and other countries, banking businesses were born spontaneously and then banking regulations and laws were created. But in Korea’s case, banking laws were made first and then banks in modern sense were established, and the different historical order must have affected how banks name their companies.
Probably because of this difference, American financial systems often transform into whole new ideas. A good example would be the private equity fund, whose related regulations the National Assembly approved last week after some controversy. A private equity fund is a type of fund where a few individual investors put in money together to invest. In the Untied States, the original purpose of the private equity fund was to slip through regulations of the financial authorities. The U.S. financial supervisory agencies detail rules for funds that manage the money of more than 100 investors. Therefore, private equity funds are not required to register with the financial authorities and have no restrictions on where they invest. Newbridge Capital, the major shareholder of Korea First Bank, and the Carlyle Group, the former major shareholder of KorAm Bank, are well-known private equity firms.
But the adopted version of private equity funds in Korea is different from the American system. Korea’s private equity funds must be registered with the financial authorities and have limited investment options. The financial watchdog will be especially strict on purchases of more than 4 percent of a bank. The similarity with the private equity funds of the United States would be gathering money from a small number of investors. As an orange crosses the Pacific Ocean, it mutated into a tangerine.
Korea’s financial supervisory system is based on positive regulations; if it’s not in the rules, you can’t do it. U.S. rules specify what you cannot do.
If we wish to become a financial hub of Northeast Asia, we need to contemplate at what point the orange turns into a tangerine.
by Lee Se-jung
The writer is an editorial writer for the JoongAng Ilbo.