Full-Scale Discussion on Profit-Sharing Bill...Financial Sector Watches Closely for February Special Session

[Image source=Yonhap News]

원본보기 아이콘

[Asia Economy Reporter Kiho Sung] With the opening of the February extraordinary session of the National Assembly, the financial sector's attention is turning to the legislature. This is because bills related to the recently hot topic of the ‘profit-sharing system’ are entering full-scale discussions. Previously, bills that burdened the economy, such as the three corporate regulation laws (Commercial Act, Fair Trade Act, Financial Group Supervision Act) and labor laws, passed the National Assembly floor tailored to the ruling party’s preferences, putting the financial sector on high alert and closely monitoring the situation.

According to political and financial sources on the 1st, the most controversial bills expected in this extraordinary session are the ‘Three Coexistence Solidarity Acts’ aimed at resolving polarization caused by COVID-19: the Loss Compensation System, the Cooperative Profit-Sharing Act, and the Social Solidarity Fund Act to activate the profit-sharing system. Within the ruling party, it is believed that the opposition party will find it difficult to oppose these bills to the end since they are aimed at COVID-19 damage relief.

Among the Three Coexistence Solidarity Acts, the bill that the financial sector reacts to most sensitively is the ‘Social Solidarity Fund Act.’ Since the 21st National Assembly, a total of five bills under different names have been proposed.

The Democratic Party has established a basic policy to pass the Social Solidarity Fund Act, but the specific contents of the bill are still under discussion. However, the general view is that the ‘Partial Amendment to the Act on Support for Financial Life of Ordinary People’ proposed by Representative So Byung-hoon will form the main framework. So’s bill proposes establishing the Citizen Finance Promotion Agency and, based on this, using private resources such as financial companies’ contributions, corporate donations, dormant deposits, and government resources to provide credit guarantees and loans. This contains the core of the profit-sharing system in the financial sector that has recently begun in the political arena.

The fact that such fund formats have been successfully activated is another factor making the financial sector more uneasy. The ‘Large and Small Business Win-Win Cooperation Fund’ started in 2013 with a contribution of 226 billion KRW but grew nearly fivefold to 1.3499 trillion KRW as of 2021 in just eight years. Although it began under the name of ‘voluntary donations,’ now most of the country’s leading companies, including Samsung and Hyundai Motor Company, participate.

The ‘Cooperative Profit-Sharing Act,’ which shares profits between COVID-19 beneficiary and affected industries, is also controversial. The bill, based on the ‘Large and Small Business Win-Win Cooperation Promotion Act’ proposed by Representatives Jo Jeong-sik and Jung Tae-ho respectively, originally focused on profit distribution between large and small businesses. However, recently the ruling party has expanded the scope to include platform companies, putting fintech firms on high alert.

The Partial Amendment to the Electronic Financial Transactions Act proposed by Democratic Party Representative Yoon Kwan-seok in November last year is also scheduled for full discussion in the February extraordinary session. This bill includes the introduction of new licenses for MyPayment and comprehensive payment settlement operators. If passed, big tech (large information and communication companies) and fintech firms will become ‘quasi-banks’ capable of performing most banking services except deposits and loans based on data.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.