K-Bank Finds Recovery Clue... Internet Banking Act Amendment Passes Judiciary Committee

[Asia Economy Reporter Kim Hyo-jin] K-Bank, South Korea's first internet-only bank, which has been struggling due to financial difficulties, has found a lifeline. This comes as KT is set to become the major shareholder.

On the 4th, the National Assembly's Legislation and Judiciary Committee passed an amendment to the Special Act on Internet-Only Banks during a plenary session. The amendment is expected to be enacted following the plenary session scheduled for the 5th.

K-Bank plans to overcome its financial difficulties by changing its major shareholder to KT and receiving a capital injection of 590 billion KRW, expanding its capital to the 1 trillion KRW level. With these conditions in place, other major shareholders such as Woori Bank and NH Investment & Securities are also expected to participate in a large-scale capital increase.

The current Special Act on Internet-Only Banks prohibits KT from becoming the major shareholder. This is because KT's collusion (violation of the Fair Trade Act) is considered a disqualification for major shareholders. Accordingly, financial authorities have suspended the eligibility review of KT as a major shareholder of K-Bank. The core of the amendment is to exclude violations of the Fair Trade Act from the disqualification criteria for major shareholders of internet banks.

Since opening in April 2017, K-Bank has continuously suffered from financial difficulties. As of the end of September last year, K-Bank's Basel III Capital Adequacy Ratio (BIS ratio) was 11.85%, the lowest in the industry. According to banking supervision regulations, if the BIS ratio falls below 10.5%, dividend restrictions are imposed, and if it falls below 8%, financial authorities take management improvement measures. Due to capital issues, K-Bank has sequentially and temporarily suspended the sale of new loan products since April last year.

The amendment passed the National Assembly's Political Affairs Committee in November last year but was repeatedly blocked at the final stage in the Legislation and Judiciary Committee. The opposition argued that excluding the Fair Trade Act from the major shareholder review grants special favors to a specific large corporation and ultimately undermines the financial business law system.

This content was produced with the assistance of AI translation services.