Committee questions K bank’s approvalA special committee of the Financial Services Commission has determined that the approval process for K bank, Korea’s first internet-only bank, may not have been entirely transparent.
In a report submitted to the commission on Wednesday, the committee said that the commission interpreted the conditions necessary to gain approval differently for K bank compared to previous cases.
“The interpretation of the related law was not transparent and the amendment of enforcement ordinance after granting approval was inappropriate in timing,” said the committee.
The committee, headed by Yoon Suk-heun, a business professor at Seoul National University, was launched in August this year with the aim of bringing regulatory reform to the financial industry. It was also asked to look into allegations that K bank may have received special favors during its approval process.
K bank was created by a consortium led by KT, a leading telecommunication provider. Because of the banking act that prohibits non-financial companies from becoming the main shareholder of financial companies, Woori Bank became the largest shareholder of K bank. The allegation was that Woori Bank failed to meet the legal standards necessary for K bank to gain government approval. The law requires the main shareholder to have a BIS capital ratio above the market average. Woori Bank’s BIS capital ratio at the time of the screening was reportedly at 14.01 percent, while the market average for banks in Korea stood at 14.08 percent.
The Financial Supervisory Service, the country’s financial watchdog, ruled that Woori Bank did not meet the legal standards. But the Financial Services Commission granted K bank preliminary approval after a legal interpretation committee said the average BIS capital ratio over the past three years could be used as a reference instead of the quarterly ratio. The legal standards have been dubious before, and the government reportedly removed the clause from the law after giving K bank the green light.
The committee, however, is yet to decide whether granting K bank approval was illegal.
“The committee is still conducting an inspection and holding discussions on whether the approval of K bank was legitimate,” said committee chair Yoon, who added that it is seen as a part of the policy to promote internet-only banks in Korea rather than giving privilege to a specific player. The committee is set to make a final decision on the matter by December.
The committee advised that authorities create a set manual for the approval of financial companies for the future, and make the related standards more consistent. When legal interpretation is necessary, the committee recommended the commission obtain help from a neutral third-party such as the Ministry of Government Legislation.
BY CHOI HYUNG-JO [firstname.lastname@example.org]
with the Korea JoongAng Daily
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