The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have met with bank holding companies in South Korea to greenlight the first banking expansion in thirty years and announce a range of new measures aimed at promoting competition in the industry.
The measures have been developed through taskforce meetings held since February this year and are aimed at encouraging new players to enter the market. Significantly, it means regional banks can expand their operations nationwide with the possibility of establishing a new nationwide bank outside of Seoul.
“For the first time in thirty years, a new nationwide bank can be established,” said FSC Chairman Kim Joo-hyun, in his opening remarks, at the beginning of the meeting.
He added: “This change is meaningful as the new nationwide bank can have its headquarters not in Seoul but in another regional city. We will issue new banking licenses to those equipped with sufficient capital and a viable business plan.”
Aside from improving banks’ overall management practices, the key areas of reform identified by financial authorities include promoting competition, improving interest rates, strengthening financial stability and increasing non-interest revenues. Enhancing employee benefits and shareholder policies, as well as encouraging corporate social responsibility are also being targeted among the wide-ranging changes.
Collaboration is key
During the meeting, Chairman Kim Joo-hyun emphasised the need for fair and effective competition in the banking sector and highlighted the collaborative efforts made over the past four months, involving experts, industry officials, and research institutions. He also acknowledged the public perception that banks have been reluctant to change due to their dominant position.
As part of the reform regulators will require banks to provide adequate information to consumers for more informed decision-making while the recently introduced online loan transfer system will be expanded to include refinancing of home-backed mortgage loans.
Meanwhile, the FSC said efforts will be made to facilitate competition between nonbank financial institutions, fintech businesses, and traditional banks. This includes promoting mergers and acquisitions among savings banks to boost competition in deposit and loan markets. Collaboration between finance and technology sectors is seen as a key driver of innovative products and services through the use of advanced data analytics.
Chairman Kim also expressed optimism that these measures, once implemented, will establish the financial industry as a major global player by promoting fair competition and innovation.