[THE INVESTOR] Non-financial operators of internet-only banks in Korea are gearing up to comply with a new legal framework designed to lower the regulatory bar in their ownership and spur fintech innovation.
The new law, to take effect on Jan. 17, will allow tech companies -- KT and Kakao -- to own up to 34 percent of the respective banking entities.
Korea is home to two internet-only banks -- K bank and Kakao Bank -- both founded in 2017.
Kakao Bank software displayed on a smartphone
Under the current law, non-banking entities are banned from either holding more than 4 percent of shares with voting rights or 10 percent of stocks without voting rights. The regulation intends to deter such companies from appropriating capital in the subsidiary bank.
Through the fresh move led by the Financial Services Commission, companies dedicated to information and communications technology with over 10 trillion won (US$8.93 billion) capital will be exempted from the provision.
So far, financial institutions are only eligible to own over 10 percent of the online-only banks. K bank’s biggest shareholder is commercial bank Woori Bank that owns 13.79 percent stake, whereas that of Kakao Bank is Korea Investment Holdings, a parent company of Korea Investment & Securities, with 58 percent shares.
The regulatory hurdle had induced tech companies to form consortiums involving financial firms to exert ownership of banking entities, only to hamper the decision-making process such as paid-in capital increase.
The deregulation will also invite more players to jump in the banking industry. Tech companies such as e-commerce firm Interpark and search engine operator Naver are likely candidates for a third internet-only bank, according to sources.
By Son Ji-hyoung (firstname.lastname@example.org)