K bank gains approval to join alliance

K bank, Korea’s first internet-only bank, became an official member of Korea Federation of Banks, the federation said Wednesday.

“K bank has completed the membership procedure with the KFB, including acquiring approval by the general meeting,” the bank federation announced.

This is the first time the federation has added a bank member in 25 years. The KFB membership has been declining since the 1997 Asian financial crisis, when it went from 35 to 20 by the end of last year. Although two entities joined in 2005 and 2009, they were non-bank members - the Korea Housing Finance Corporation and Korea Finance Corporation. The Korea Finance Corporation merged in 2015 with Korea Development Bank, also a member of the KFB. With K bank, there are now 21 institutions under the KFB.

“There were concerns that the Korean banking sector as a whole may be deteriorating, with no new membership at the KFB or no new players in the industry,” said Choi Jin-woong, a manager at the planning and research department in the KFB. “But now, K bank joining our federation means that the industry may be in the process of revitalization.”

Choi added that Kakao Bank, another internet-only bank awaiting final approval from the government to receive a business license, also may join the federation soon. “It notified us last year that it has the intention to obtain membership with us,” he said.

As a member of the KFB, K bank will gain access to the federation’s sector-wide network. “It will also be able to utilize the network we have with financial authorities such as the Financial Services Commission,” Choi explained. “The resources and database we have accrued over the years will come in handy for K bank when it starts its business.”

Still, it remains to be seen when K bank will be launched and whether the legal framework in Korea will be revised in time to streamline its operation. Upon receiving approval by the authority in December, speculation arose that K bank will be able to launch its service shortly after Lunar New Year. However, just before the holidays, K bank said it will postpone its launch date citing a server-wide inspection.

Some skeptics are concerned that even if K bank launches its service, its operation may be stymied by unfavorable business conditions in Korea created by the Banking Act, a law intended to separate banking from commerce.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]