FSC reviews rules to boost fintech

As part of the move toward deregulation, the Financial Services Commission (FSC) has come up with measures to boost the so-called fintech business, which it believes is a potential growth engine for the flagging financial industry.

The FSC on Wednesday reported to the Blue House on its plan to ease or revise some current regulations that are deemed unnecessary or obstacles to establishing fintech companies.

According to the plan, the financial regulator is considering reviewing interpretations of the financial holding company, banking and financial industry laws.

It might not make amendments, but could change the way the laws are interpreted.

Currently, the banking industry law bans non-financial companies with more than 2 trillion won ($1.8 billion) in assets from owning financial subsidiaries.

The ban was adopted in 1983 to restrict Korea’s family-owned conglomerates from getting into the financial business.

Non-financial businesses can hold a maximum 4 percent stake in financial companies or banks, according to current law.

Yim Jong-yong showed a clear intention to ease the ban at an April seminar hosted by the Korea Institute of Finance and Korea Federation of Banks.

But the FSC’s basic posture is that it will not change the current language that prevents large businesses from jumping into the fintech market, while giving some slack to smaller businesses and start-ups.

As the first step, under the financial holding law and banking law, which currently stipulates that financial companies can invest in companies that do businesses in related areas, the financial authority will allow banks to invest in fintech companies.

Banks will be able to invest in companies that specialize in electronic payments, financial software development, big data developers, credit information analysis and so forth.

In the long run, this new interpretation will work the other way around, allowing IT businesses of a certain size to hold some stakes in financial companies, according to government officials who declined to be identified.

Korea, which is known as an IT powerhouse, is way behind in terms of direct banking via the Internet and mobile channels that require no face-to-face encounters. In 1995, the United States allowed the establishment of direct banks, such as Charles Schwab Bank and Ally Bank, and the United Kingdom and Japan followed suit.

Fintech is one Yim’s top priorities for his two-year term as FSC chairman.

Yim has been a strong advocate of deregulating the financial industry, saying old rules should be revised in order to allow businesses from various sectors to participate in the financial market. He believes this is an important way to promote competitiveness in the financial sector.

Yim also reported to the president that his organization will seek to lower the minimum capital amount required to establish a fintech company to 100 million won to encourage those lacking initial capital to start businesses.

State-run Korea Development Bank and Industrial Bank of Korea each will issue 100 billion won in loans this year for fintech start-ups, the FSC said.

The nation’s real name financial transaction law will also be relaxed. It requires that new financial accounts be opened in person, but will allow multiple channels of identification to be used for online transactions.

Based on the reviewed rules, the FSC will announce its plan to promote the establishment of direct banks, the cornerstone of the fintech market, in June.

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]