South Korea reviews allowing insurers to conduct banking operations

A task force was formed to look into this.

South Korean insurers could be allowed to conduct some banking operations as financial authorities reflect on more ways to promote competition and break the current oligopoly in the banking industry, a report by Korea Times said.

According to the proposal by government regulators, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), insurers and brokerages could be granted a ‘small license’ for the banking industry, which means giving them fragmented licenses to each function of the 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.

This is because according to the regulators, 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.

To discuss this further, FSC and the FSS  formed a task force, bringing in key financial associations and scholars to help bring changes to banking management and practices in the country.

"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.

The news comes after South Korean President Yoon Suk Yeol criticised banks earlier this month for booking profits and giving executives big bonuses whilst borrowers struggle to pay high-interest rates.

The regulators estimate that by June they would have come up with a plan to boost competition in the banking industry.