New internet-bank investment rules take effect on Jan. 17The government is hoping that IT giants will become the largest stakeholders of internet banks - and pull them out of their current rut - when new rules go into effect on Jan. 17.
Last month, changes to regulations on internet banks passed the National Assembly, boosting a ceiling of shareholdings by nonfinancial companies from 10 percent to 34 percent.
According to the Financial Services Commission (FSC) on Tuesday, while conglomerates, as defined by the Fair Trade Act, will continue to have a 10 percent ceiling on shares in internet banks, there will be an exception for conglomerates whose information and communication technology (ICT) assets are 50 percent or more of total assets. They can own up to 34 percent.
The Fair Trade Commission defines conglomerates as businesses group with assets exceeding 10 trillion won ($8.8 billion), and they face many unique restrictions, including the prohibition of mutual investments or guaranteeing of loans among affiliates as well as public disclosure requirements about unlisted affiliates.
Once new regulations go into effect in January, KT and Kakao will be allowed to become the largest stakeholders of the internet banks they helped start.
KT, which has a 10 percent stake in the country’s first internet bank, K bank, is the only IT giant that is categorized as conglomerate.
Kakao owns a 10 percent stake in Kakao Bank.
KT’s total assets from 36 affiliates exceed 30 trillion won. It is the 12th largest business group in Korea.
The government is hoping that the change in regulations will allow new IT giants, such as Naver, and game companies, like Nexon or Netmarble, to join internet banking.
FSC Chairman Choi Jong-ku has said the government is looking into approving a third internet bank in April or May.
The FSC clarified that the new regulations do not apply to conglomerates like Samsung, SK or LG, which, according to the FSC, are not ICT companies but “manufacturers.”
“The ICT that we are defining in this regulation are IT platform companies like Naver and Kakao,” said a FSC official.
The government said it is emphasizing the ICT asset ratio of potential investors instead of asset size to allow smaller players, such as fintech companies, to participate.
“Limiting the requirement to asset size would only allow large players and deprive smaller players from entering the internet banking industry,” said the FSC official.
The Moon Jae-in government has been trying to boost internet banking, which has failed to disrupt the commercial banking establishment and usher in competition and better financial services for customers.
One problem was the limit on nonfinancial companies’ investments in internet banks, which needed more investments.
In August, Moon raised the need to change internet banking regulations in order to change banking and create new jobs.
Although the situation for internet banks has improved compared to the same period last year, in the first half, they both continued to suffer net losses.
K bank reported a 39.5 billion won net loss, a slight improvement from the 40.5 billion won net loss it suffered in the first six months of 2017.
Kakao Bank reported a 12 billion won net loss during the same period, down from 18.7 billion won a year ago.
BY LEE HO-JEONG [firstname.lastname@example.org]