South Korea sets out measures to promote competition in banking sector
South Korea’s financial authorities have set out new measures to help promote competition within its banking sector.
South Korea sets out measures to promote competition in its banking sector
The measures follow a series of meetings held with private sector experts, financial industry officials and research institutions since the end of February to improve the management and operating practices of the country’s banks.
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) intend to allow more banking players to enter the market, with regional banks now receiving permission to expand their business operations across the country.
“For the first time in 30 years, a new nationwide bank can be established. This change is meaningful as the new nationwide bank can have its headquarters not in Seoul but in another regional city,” says Kim Joo-hyun, chairman of the FSC.
Financial authorities will also work to bring about fair competition by requiring banks to provide more information about their business operations and products to the market so consumers can make informed decisions. They will also look to promote competition in the loan market through the country’s new online loan transfer system.
Fintechs and NBFCs
Kim says that financial authorities will issue new banking licences “to those equipped with sufficient capital and a viable business plan”. This includes entry of new players such as internet-only banks and other types of specialised banks.
On the issue of nonbank financial companies (NBFCs) joining the country’s payments network, Kim says authorities will continue working on measures with the Bank of Korea and relevant industry groups, “as this issue requires a guarantee of system stability”.
Kim adds that regulators also plan on creating conditions where NBFCs and fintech businesses can compete with banks, including promotion of savings banks’ M&A activities and strengthening collaboration between finance and IT to create innovative products and services.
The regulators also plan to introduce regulatory reform measures for financial holding companies.
“Once we have the reform measures on financial holding companies, along with the measures for improving rules on the ancillary service system sought after since last year and the measures to promote competition in the banking industry all set in motion in harmony, I believe that our financial industry can develop as a major player in the world,” Kim concludes.
