'40 Trillion Won Support for Key Industries' KDB Act Amendment Passes Final Hurdle Today

Attention on the Passage of the Internet Bank Act Amendment Bill

Image of the National Assembly plenary session hall (Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] The bill to establish the "Period Industry Stabilization Fund" to support key industries struggling due to the novel coronavirus infection (COVID-19) (amendment to the Korea Development Bank Act) is entering its final stage of approval in the National Assembly on the 29th. The amendment to the Internet Banking Act, which is expected to resolve KT's major shareholder eligibility issue and alleviate the funding difficulties of K-Bank, Korea's first internet-only bank, is also scheduled to be presented to the plenary session.

The National Assembly plans to hold a Legislation and Judiciary Committee meeting in the afternoon to process these bills. Once passed by the committee, they will be submitted to the plenary session. Both bills passed the Political Affairs Committee the previous day.

On the 22nd, the government decided at the 5th Emergency Economic Meeting chaired by President Moon Jae-in to establish a Period Industry Stabilization Fund exceeding 40 trillion won to support seven key industries: aviation, shipping, automobile, shipbuilding, machinery, electricity, and telecommunications. The amendment to the Korea Development Bank Act provides the legal basis for the Period Industry Stabilization Fund.

The bill includes provisions to establish the fund within the Korea Development Bank, raise resources through bond issuance, and borrowings from the government and the Bank of Korea. The support targets include air transportation, general-purpose machinery manufacturing, electric power industry, automobile engine and automobile manufacturing, ship and boat building, maritime transportation, and telecommunications. Conditions such as employment retention and sharing of management performance may be imposed as prerequisites for support.

Use of funds for purposes other than financial support, such as dividends, treasury stock acquisition, and payment of compensation to executives and employees exceeding a certain income level, is restricted. When investing in companies through the Period Industry Stabilization Fund, shares without voting rights or with limited voting rights may be issued beyond the limits set by related laws. This is interpreted as a measure to resolve controversies over government management intervention.

The amendment to the Internet Banking Act is directly linked to the fate of K-Bank. KT applied for major shareholder eligibility screening by financial authorities in March last year, aiming to increase its stake in K-Bank to 34%, but the application was rejected. This was because KT became subject to a prosecution investigation for collusion under the Fair Trade Act, increasing the likelihood of violating the relevant provisions, leading financial authorities to indefinitely suspend the eligibility screening.

Under current law, non-financial major shareholders (industrial capital) specializing in ICT are allowed to increase their stake in internet banks beyond the existing limit of 4% up to 34%. However, they must not have been criminally punished with a fine or higher in the past five years for violations of financial laws, the Fair Trade Act, the Tax Offenses Punishment Act, or the Act on the Aggravated Punishment of Specific Economic Crimes.

Last month, the National Assembly attempted to pass an amendment deleting the clause that disqualifies major internet bank shareholders for prior violations of the Fair Trade Act (with fines or higher) from the approval requirements for exceeding shareholding limits. However, it was rejected in the plenary session amid opposition claims that it was a "KT special privilege law." The current amendment maintains some conditions related to unfair practices, unlike the previously rejected bill.

K-Bank has been unable to conduct new lending operations since April last year due to funding difficulties. Accordingly, a "Plan B" is being promoted, where BC Card will lead a paid-in capital increase on behalf of its parent company KT.

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