South Korean financial institutions could leverage on their expansive customer base and nationwide infrastructure to run non-financial service operations such as e-commerce, healthcare, and mobility.

Under the outline in a sweeping reform in the country’s base law strictly separating industrial and financial capital unveiled Tuesday, the Financial Services Commission (FSC) proposes “negative” lifting of the regulations to enable financial groups with sufficient capital and nationwide network to venture into a range of businesses excepting major manufacturing sector like automaking and shipbuilding.

After hearing out opinions from the financial and industrial sector, the FSC will draft a bill next year for legislative review.

The liberalization for financial capital comes as big-tech companies like Naver and Kakao have added financial services to blur the line between the financial and non-financial entities.

The new act however will maintain the division between the roles of financial and industrial capital by keeping the 4 percent cap on ownership with voting rights in financial entity by an industrial capital. An ownership beyond the level requires approval from the FSC. A single ownership by an industrial capital in commercial banks is capped at 10 percent and 15 percent in case of regional banks.

“We are looking into improving the system related to financial institutions including banks owning non-financial firms without touching upon general industrial capital becoming large shareholders of banks,” said Shin Jin-chang, director of financial industry at the FSC.

The liberalization would mostly benefit Korea’s five financial holding groups.

KB, Shinhan, Hana, Woori, and NH groups can seek synergy businesses like connected mobility, e-commerce, travel, and other agency services based on their customer data pool.

“Insolvency of a non-financial subsidiary may spread to an overall crisis in a financial group,” Shin said. “We will open possibilities in services area to enhance public convenience.”

The move however could stoke concerns for reckless expansion by financial groups and impairment in businesses of smaller size.

By Han Woo-ram, Moon Jae-yong, Chae Jong-won, and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]