'Near-Death Recovery' of K-Bank... Why the Controversy Over Chaebol Favoritism?

Controversy Over Privileges Raises Calls to "Reconsider the Purpose of the Special Act"

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[Asia Economy Reporter Kangwook Cho] Recently, with the passage of the amendment to the Special Act on Internet-Only Banks in the National Assembly plenary session, the internet-only bank K-Bank, which had been virtually dormant, has found a path to recovery. However, some still argue that there is a possibility of 'chaebol favoritism.' What is the reason behind this?

According to the financial sector on the 3rd, on the 29th of last month, the National Assembly plenary session passed an amendment to the "Special Act on the Establishment and Operation of Internet-Only Banks" (Internet-Only Bank Act) that relaxes the qualification requirements for major shareholders of internet-only banks.

The amendment mainly relaxes the conditions related to violations of the Fair Trade Act among the approval requirements for major shareholders holding shares exceeding the limit in internet-only banks.

Specifically, it reduces the conditions related to violations of the Fair Trade Act in the proviso when allowing non-financial major shareholders (industrial capital) whose main business is information and communication technology (ICT) to increase their shareholding in internet-only banks from the existing limit (4%) up to 34%.

With the passage of this bill, KT, which has a history of violating the Fair Trade Act, can secure the status of the largest shareholder of the internet-only bank K-Bank. As a result, K-Bank, which had been virtually dormant, can now proceed with normal operations through a capital increase.

For the capital increase of K-Bank, BC Card will proceed first instead of KT. On the 14th of last month, BC Card held a board meeting and decided to invest 298.8 billion KRW to acquire a 34% stake in K-Bank, replacing KT. Accordingly, BC Card plans to soon apply to the financial authorities for a suitability review as a major shareholder.

Despite this, criticism that it is still favoritism toward chaebols continues unabated. In fact, at the plenary session held in March, opposition voices claiming favoritism led to the bill being rejected.

The People's Solidarity for Participatory Democracy stated, "The existing Banking Act only allowed industrial capital to own up to 10% of bank shares, but the Internet-Only Bank Act allows ICT companies to own up to 34%, undermining the existing principle of separation between industry and banking. Furthermore, allowing major shareholders who have violated the Fair Trade Act is highly likely to further weaken financial soundness," raising their voices.

In response, K-Bank explained, "Regardless of the amendment to the Internet-Only Bank Act, we are legally proceeding with the capital increase through BC Card under the current law," adding, "Regardless of the law's passage, BC Card plans to become the largest shareholder of K-Bank and proceed with the business."

KT also emphasized regarding the 300 billion KRW capital increase through BC Card that it is "part of KT's responsible management to address concerns about K-Bank's declining BIS ratio, bank runs, financial turmoil, and consumer protection."

The financial sector views the passage of the Internet-Only Bank Act amendment positively. It is seen not merely as a law for KT but as a milestone for innovative finance. If the relaxation of major shareholder regulations does not occur, it will be a burden not only for existing internet-only banks but also for other IT companies and latecomers attempting to enter the internet-only banking market.

There are also calls to revisit the original purpose of the Special Act and the background of the industry-banking separation principle.

Professor Jiyong Seo of the Department of Business Administration at Sangmyung University said, "If the main background of the industry-banking separation principle is concerns about financial sector privatization through irregular circular shareholding by chaebol owners for ownership management purposes, it does not seem desirable to negatively equate all industrial capital. Since the suspension of K-Bank loans directly results in the suspension of financial support to the majority of financial consumers, causing opportunity costs in the financial sector, I hope for the prompt normalization of K-Bank's operations," he said.

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