South Korea – Insurers and brokerages are likely to be allowed to enter the banking sector to promote competition as financial authorities mull over measures to break the current oligopoly in the banking industry.
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) recently formed a taskforce with key financial associations and scholars to bring changes to banking management and practices in the country to facilitate competition in the fragmented banking functions of savings, loans and payments.
“In order to bring real competition to the areas of savings and loans, players from other financial sectors, including insurers, brokerages and savings banks, are encouraged to join,” FSC Vice Chairman Kim So-young said during the first meeting of the taskforce last Wednesday.
Financial regulators view that it would be more realistic to invite major players of other financial sectors, such as insurers and securities firms, into the banking business to promote competition, as the entries of entirely new players in the banking industry will take too much time for them to grow to be able to compete with established players.
This is what the FSC and the FSS had in mind when they announced that they would adopt a “small license” for the banking industry, which means giving out fragmented licenses to each function of banking businesses. For instance, brokerage companies, insurers and savings banks could compete with banks in payment settlements, loans and foreign exchange. Card companies and digital-only banks are also likely to be eligible to apply for such fragmented licenses in the banking business.
Market watchers expect major companies of the insurance, card and brokerage sectors, such as Samsung Life, Shinhan Card and Mirae Asset Securities, might take steps to join the banking business.
The financial authorities are also looking into ways to strengthen platforms where major commercial banks’ loans and savings interest rates will be directly compared, in order to promote competition and convenience for consumers.
More specific details of the measures are slated to be announced by the end of June, with the voices of the industries being reflected in the process.
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