ICT (Information Communication Technology) businesses such as Kakao and Naver will be given opportunities to become major shareholders of internet-only banks. South Korean Government has allowed ICT platform providers to have shares of internet-only banks.
It is becoming more possible for large IT businesses such as Naver and Nexon to participate in financial markets as South Korean Government is easing separation of banking and commerce policies and enforcing Internet Bank Act. It is expected that there will be many ‘ICT + finance’ consortiums established starting from next year to control internet-only banks.
Kakao and KT that are leading Kakao Bank and K-Bank respectively can become major shareholders after January of 2019. It is interesting to see whether this will become an opportunity for South Korea’s financial ecosystem to evolve once again.
Financial Services Commission (FSC) made pre-announcement of legislation of a proposal of enforcement ordinance of an exemption law (Internet Bank Act) related to establishment and operation of internet-only banks on the 17th.
This proposal requires shareholders of internet-only banks to be a corporate group that has total asset of its ICT business over 50%.
South Korean Government has approved ICT platform providers to have shares of internet-only banks. This allows ICT businesses such as Naver and Kakao to become major shareholders of internet-only banks.
It is expected that this change will lead ICT businesses such as Naver to actively make attempts to become major shareholders of internet-only banks.
Actually, Naver and Shinhan Bank and NH Bank that did not participate in internet-only banks in the past have started discussing about becoming major shareholdes of internet-only banks. Telecommunication businesses and distributors are also discussing internally and they are having various discussions about participating in third-party consortiums.
Internet Bank Act that passed through The National Assembly regulates groups that have limited mutual investments from having more than 10% of shares of internet-only banks. However, companies that manage more of information communication businesses will be given exceptions to this act through this enforcement ordinance.
This enforcement ordinance sees ICT businesses as information communication businesses according to Statistics Korea’s standard industry categorization to bring back intention of bringing in internet-only banks that are considered as convergence between ICT and finance. Book, magazine, and printout printing companies, broadcasting companies, and public post offices are excluded from this exception. Also, ICT manufacturing businesses such as Samsung Electronics and SK Hynix are also excluded from this exception. As a result, it will be impossible for Samsung Group and SK Group to become major shareholders of internet-only banks.
It is also possible for foreign ICT businesses to have share of South Korean internet-only banks. However, South Korean Government is going to evaluate level of their contribution towards development of South Korea’s financial industry, development of South Korea’s FinTech industry, and support of small-loan finance.
Credit offering to a major shareholder will be prohibited as well. For example, if Kakao becomes the major shareholder of Kakao Bank, it will be impossible for Kakao Bank to carry out credit offering to Kakao.
Exceptions will be made for cases when credit offering is given to major shareholder due to M&A and acquisition of businesses . Cases where equity securities issued by shareholders are obtained inevitably due to exercise of security right and payment in substitutes are also exceptions.
South Korean Government is also allowing face-to-face businesses partially. Face-to-face businesses are applicable in improving level of convenience for elderly and disabled people. They are also allowed when financial transactions cannot be done due to loss of Smartphones and others.
“We have made this exception so that companies that are specialized in information communication industry can promote convergence between finance and ICT.” said a representative for FSC. “We have also established various regulations so that internet-only banks are not abused by major shareholders.”
Staff Reporter Ryu, Geunil | ryuryu@etnews.com & Staff Reporter Gil, Jaeshik | osolgil@etnews.com