K Bank's 'Revival' Gains Momentum... Internet-Only Bank Act Amendment Passed by National Assembly

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[Asia Economy Reporter Kim Hyo-jin] The amendment to the "Special Act on the Establishment and Operation of Internet-only Banks (Internet-only Bank Act)," which was expected to resolve the major shareholder eligibility issue of KT and alleviate the financial difficulties of K-Bank, Korea's first internet-only bank, has passed the plenary session of the National Assembly. This is expected to give further momentum to the normalization of K-Bank, which has been drifting after suspending new loan operations.

According to financial and political circles on the 30th, the National Assembly approved the amendment to the Internet-only Bank Act in the plenary session the day before, which relaxes the qualification requirements for major shareholders of internet banks. The amendment has attracted attention as it is directly linked to the fate of K-Bank.

K-Bank had hoped to overcome its financial difficulties by receiving a capital injection if KT became the major shareholder. In March last year, KT applied to the financial authorities for a major shareholder eligibility review, 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 alleged collusion under the Fair Trade Act, increasing the likelihood of violating the relevant provisions, leading the financial authorities to indefinitely suspend the eligibility review.

The existing regulation allows non-financial major shareholders (industrial capital) focused on ICT to increase their stake in internet banks beyond the existing limit of 4% up to 34%. However, they must not have received criminal penalties of fines or higher for violations of financial-related laws, the Fair Trade Act, the Tax Offense Punishment Act, or the Act on the Aggravated Punishment of Specific Economic Crimes within the past five years.

The National Assembly attempted last month to pass an amendment deleting the record of Fair Trade Act violations (fines or higher) from the approval requirements for major shareholders holding shares exceeding the limit in internet banks, but it was rejected in the plenary session amid opposition claims that it was a "KT special favor law." The current amendment maintains some conditions such as unfair practices, unlike the previously rejected bill.

The normalization of K-Bank is expected to proceed with the recently prepared "Plan B." On the 14th, BC Card decided through a board resolution to acquire 10% of K-Bank shares held by its parent company, KT. BC Card also plans to participate in K-Bank's paid-in capital increase in June to secure up to 34% of shares, including the purchase of KT's existing shares. This is a "detour" type rescue operation with BC Card stepping in on behalf of its parent company.

Inside and outside KT, there is a growing voice that the priority is to quickly normalize K-Bank using the method that has already partially progressed. Due to financial difficulties, K-Bank has been unable to conduct new loan operations since April last year. An industry insider said, "Whether KT directly takes action is a matter that could be carefully considered in the future."

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