Bill 'Package' Targeting Samsung's Trigger... Simultaneous Discussion of Insurance Business Act and Fair Economy Act

Samsung Life's Issue of Selling Samsung Electronics Shares

[Image source=Yonhap News]

[Asia Economy Reporter Park Cheol-eung] A bill requiring Samsung Life Insurance, a core part of Samsung Group's governance structure, to sell its shares in Samsung Electronics will be discussed in this regular session of the National Assembly. It is part of the government's and ruling party's focus on promoting 'fair economy' to reduce risks for financial companies, and the People Power Party also emphasizes economic democratization, which could give the bill momentum. From Samsung's perspective, it must prepare for a situation where the governance link could be severed, alongside the trial concerning Vice Chairman Lee Jae-yong's alleged illegal succession of management rights at Samsung Electronics.

On the 15th, Rep. Lee Yong-woo of the Democratic Party of Korea said in a phone interview with Asia Economy, "The amendment to the Insurance Business Act will be discussed in this regular session," adding, "It should be considered in connection with the Financial Group Integrated Supervision Act proposed by the government."

For customer protection, the Insurance Business Act currently prohibits holding affiliate shares exceeding 3% of total assets. The amendment proposed by Rep. Lee changes the current acquisition cost basis to market price, and it is sometimes called the 'Samsung Life Insurance Act.' Samsung Life Insurance holds 8.51% of Samsung Electronics shares. While there is no issue now, if the basis changes to market price, it would have to sell shares worth over 20 trillion won.

Previously, Rep. Park Yong-jin of the Democratic Party, who introduced the bill during the 20th National Assembly, reintroduced it, and Rep. Lee, a former CEO of Kakao Bank and a leading financial economist within the ruling party, has joined the effort. Along with amendments to the Commercial Act and the Fair Trade Act, the Financial Group Integrated Supervision Act, which the government promotes as one of the 'Three Fair Economy Laws,' also targets Samsung. This is because it manages 'concentration risk' that may arise from transactions or investments within corporate groups, beyond the current supervision of individual financial companies.

Rep. Lee explained, "Even if the Financial Group Integrated Supervision Act passes, it will be difficult to achieve effectiveness unless the inconsistency between calculating total assets at market price and affiliate stocks at acquisition cost in the Insurance Business Act is resolved." Since transitioning to the emergency committee led by Kim Jong-in, the People Power Party has incorporated 'economic democratization' into its platform and expressed openness to discussions on the 'Three Fair Economy Laws.'

Lee Yong-jun, senior expert of the National Assembly's Political Affairs Committee, commented on the Insurance Business Act amendment, saying, "It will be necessary to comprehensively consider regulatory fairness among financial sectors, the need for reasonable asset management regulations, the trust and property rights protection of insurance companies, and social repercussions."

In the capital market industry, assuming these bills pass, analyses considering future restructuring of Samsung Group's governance structure are being released. Kim Soo-hyun, a researcher at Shinhan Financial Investment, stated in a report on the same day, "In the public apology in May, management formalized the long-term corporate value enhancement goal of Samsung Group, and scenarios including restructuring and selling unrelated businesses are possible," adding, "If the Insurance Business Act is amended, Samsung C&T's financial structure improvement and securing cash assets to purchase Samsung Electronics shares could allow enjoying a premium at the top of the governance structure."

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