Kim Juhyun's 'Daemotppokgi' Initiative... Will the 15% Bank Equity Cap Be Lifted?

Financial Services Commission Chairman Nominee Proposes Easing Geumsan Separation
Establishing a Foothold for Banks' Entry into Non-Financial Businesses
'Article 37 of the Bank Act' 15% Investment Limit Is Key

Image source=Yonhap News

[Asia Economy Reporter Sim Nayoung] As Kim Juhyun, the nominee for the Financial Services Commission chairman, brought up the card of ‘improving the separation of banking and industry’ for the innovation of existing financial companies, banks are showing a positive response. Since Kim expressed his intention to amend the law, banks are expecting that the long-awaited foundation for ‘entry into non-financial businesses’ will be established quickly.

On the 7th, Kim held a press briefing and said, "If overseas financial companies are doing well in certain businesses but our domestic banks are not, we will look into the reasons and remove any unjustifiable restrictions," adding, "From the perspective of existing financial companies, there is no valid reason to restrict banks from doing what big tech companies are doing, so we will ease those regulations."

This is interpreted as an intention to allow financial companies to enter other industries. The separation of banking and industry is a principle that prohibits financial capital and industrial capital from owning or controlling each other’s businesses. Financial companies have raised issues that this law restricts their entry into non-financial sectors, preventing them from owning companies in other industries. It was also impossible to offer services combining financial and non-financial sectors. Banks have continuously requested the government to improve this ‘tilted playing field’ problem, arguing that it is unfair to compete with big tech companies that have entered the financial industry under these circumstances.

Regarding this, Kim said, "The separation of banking and industry is a very sensitive issue; in the past, just mentioning it would provoke strong social opposition," but he emphasized again, "However, considering the changes in the technology industry now, it is time to review whether applying the old separation of banking and industry is appropriate and whether improvements are necessary."

A key point to watch is whether the amendment to Article 37 of the Bank Act, which states that "a bank may not own more than 15% of the voting shares of another company," will be made. Kim Kwangsoo, chairman of the Korea Federation of Banks, said there are two ways to allow banks to invest in lifestyle services such as fintech, virtual assets, distribution, and telecommunications. Chairman Kim explained, "First, the 15% investment limit could be lifted to allow the combination of financial and non-financial sectors, or second, like in Japan, certain digital industries that can merge with banks could be designated as ‘bank-related businesses’ to expand banks’ scope of activities."

Meanwhile, on the household debt issue, Kim stated, "We will maintain the household debt stabilization policy based on the Debt Service Ratio (DSR)." Regarding virtual asset regulations, he urged the industry to self-regulate. Kim said, as a measure to prevent investor damage from virtual asset crashes like the second Luna incident, "We will improve legal systems," but added, "Since legislation takes a long time, it would be good if the virtual asset industry could show what it can do autonomously."

Kim’s office for preparing the confirmation hearing has been set up at the Korea Deposit Insurance Corporation in Dae-dong, Jung-gu, Seoul, but the hearing schedule has not yet been decided due to delays in the National Assembly’s organizational agreement.

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