"Even Selling Gold, Silver Is Not Allowed"...Absurd Regulation Blocking Savings Banks (Comprehensive)

Positive Regulation Allows Only Permitted Tasks; Otherwise, Principally Prohibited
'Absurd' Regulations Far from Accident Prevention and Consumer Protection
Industry Appeals to Lift Unnecessary Regulations or Adopt Negative Regulation Approach

[Asia Economy Reporter Song Seung-seop] It has been identified that irrational regulations still persist in the savings bank industry, which is recording record-breaking performance with over 7 million customers. Some measures are far from protecting financial consumers, and there are criticisms that they hinder the strengthening of business competitiveness such as promotion and marketing.

According to the industry on the 28th, under current regulations, savings banks can sell gold bars but cannot sell silver bars. The sale of gold bars started when financial authorities allowed savings banks to sell eight types of products ranging from 3.75g to 1kg, under the pretext of securing ancillary income and diversifying business. Although silver is a similar mineral, silver bars are not included in the approved list and therefore cannot be sold. Opening gold passbook accounts that allow investment in gold in 1g units is also not permitted.

The same applies to game tickets and performance admission tickets. Gift certificates and lottery tickets included in the types of savings bank business can be sold to customers, but certain types of ‘tickets’ cannot be sold. Tickets for sports games sponsored or invested in, or for affiliated sports teams directly operated by the bank, are also not allowed. Currently, OK Savings Bank, which operates a volleyball team, cannot sell tickets for its team except for promotional purposes.

This is because the entire financial industry, including savings banks, is subject to ‘positive regulation.’ Positive regulation is a regulatory system that lists what is permitted by law and policy, and disallows everything else. Savings banks can only conduct business specified in the ‘Standard Business Manual for Savings Banks’ announced by the Financial Supervisory Service. In principle, they cannot perform any business other than those permitted by financial authorities. If they wish to change the type or method of business, they must notify the Financial Services Commission in advance.

The savings bank industry explains that although commercial banks are also subject to the same positive regulation, the level of application and scope of permitted business are different. There are complaints that regulations are excessively strict even in areas unrelated to core regulatory fields such as asset or credit management and soundness. In the case of ticket sales, commercial banks have traditionally conducted them even before they were officially permitted, and financial authorities currently recognize them as official ancillary business. Silver bars and gold passbook accounts are also possible at commercial banks.

Positive Regulation Is Particularly Strict for Savings Banks

Authorities are gradually changing regulations, but the industry believes these changes lag behind the rapidly evolving market. Delayed deregulation reduces effectiveness and appeal.

A representative example is the relaxation of TV advertising regulations for savings banks. In September 2015, the Financial Services Commission, in consultation with the Korea Federation of Savings Banks, prohibited savings bank advertisements from airing between 7-9 AM and 1-10 PM on weekdays, and 7 AM to 10 PM on weekends and holidays. Last year, restrictions were lifted for ‘image’ advertisements, allowing broadcasts without time limits, but this came after YouTube and social network service (SNS) marketing had already become active. The requirement for branch establishment also shifted from a licensing system to a notification system at the end of last year, promoted amid the reduction of physical branches due to COVID-19 and the activation of non-face-to-face finance.

Industry insiders argue that since the 2011 savings bank insolvency crisis, the industry's soundness and trust have largely recovered, so irrational regulations should be revised. As of the end of March, the number of savings bank customers reached 7,029,986, the highest since the Korea Federation of Savings Banks began compiling statistics in 1980. The scale of deposits and savings also reached a record high of 84.9943 trillion won.

For this reason, some voices call for easing unnecessarily rigid regulations or introducing negative regulation across the industry. A savings bank official said, “Finance is a regulated industry, and strict regulations suitable for the savings bank environment must be acknowledged,” but added, “It is problematic when incomprehensible regulations hinder competitiveness.” Another official appealed, “It would be fine to list the businesses savings banks are not allowed to do, so a negative regulation system is needed.”

Professor Lee Kyung-mook of Seoul National University’s Business School advised, “The Korean financial industry is among the most heavily regulated worldwide. Strong regulations should be maintained to prevent reckless business such as excessive lending to specific entities or financial accidents, but ancillary businesses should be left to the discretion of companies.”

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