Banks Allowed to Own MyData Subsidiaries... Banks Also to Provide Accounts Receivable Insurance Guidance

Financial Authorities Amend Banking Supervision Regulations

[Asia Economy Reporter Kim Hyo-jin] Banks are now allowed to hold financial personal credit information management service (MyData) companies as subsidiaries.

Additionally, small and medium-sized enterprises (SMEs) will be able to receive guidance on accounts receivable insurance products at bank counters.

According to financial authorities on the 23rd, the Financial Services Commission approved an amendment to the Banking Supervision Regulations containing these provisions at its regular meeting the day before.

Through this amendment, financial authorities added MyData to the list of industries in which banks can hold subsidiaries. Accordingly, banks will be able to operate the MyData business through subsidiaries starting from August when the MyData service is launched.

However, if acquiring 20% or more of the shares of such subsidiaries, approval under the Financial Industry Structural Improvement Act must be obtained.

Once MyData is launched, consumers will receive services specialized for them such as information management, asset management, and credit management from MyData companies. For this reason, MyData is also called a "financial secretary" or "Pocket Finance."

Financial authorities have been accepting preliminary applications for MyData licenses since the 13th of this month. Formal license applications will be accepted after the 5th of next month.

In addition, financial authorities added accounts receivable insurance brokerage services to the concurrent business of banks. Accounts receivable insurance is insurance against losses such as when SMEs provide goods or services but do not receive payment from the trading companies.

Accounts receivable insurance is operated by the Korea Credit Guarantee Fund using government subsidies and other funds. Banks will now be able to handle advertising, product explanations, and contract solicitation on behalf of the Korea Credit Guarantee Fund.

This amendment was promoted in response to a cooperation request from the Ministry of SMEs and Startups. Financial authorities and the Ministry expect that the accessibility of accounts receivable insurance for SMEs exposed to the risk of default by trading companies will be significantly improved.

Financial authorities also added asset-backed electronic short-term bonds (ABSTB) purchase agreements to the scope of credit extension.

Electronic short-term bonds were introduced in 2013 as electronic bonds to address the problems of commercial paper (CP), which is issued in physical form and cannot be divided or distributed.

Typically, the underlying assets have long maturities, while electronic short-term bonds have short maturities, creating refinancing risk.

The banks' purchase agreements for electronic short-term bonds mean that if the issued electronic short-term bonds are not sold in the market, the banks will purchase them. This reduces refinancing risk and strengthens the credit of the bonds.

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