K Bank's Fate Hinges on February Extraordinary Session... Revival Possible Through Revision of 'Major Shareholder Qualification'?

[Asia Economy Reporter Kim Hyo-jin] Attention is focused on whether K-Bank, Korea's first internet-only bank, which has been drifting due to financial difficulties, can find a lifeline with the temporary National Assembly session this month. This is because the revision bill of the 'Internet-only Bank Special Act,' which is tantamount to opening the way for a large-scale capital increase, may pass the plenary session.

According to the financial and political circles on the 15th, the National Assembly's Legislation and Judiciary Committee plans to discuss the revision bill of the Internet-only Bank Special Act once again at the February temporary session starting on the 17th.

K-Bank planned to overcome its financial difficulties by changing KT to the major shareholder and receiving a capital injection of 590 billion won, thereby expanding its capital to the 1 trillion won level. If such conditions are created, other major shareholders such as Woori Bank and NH Investment & Securities are also expected to participate in the large-scale capital increase.

The current Internet-only Bank Special Act prohibits KT from becoming the major shareholder. This is because KT's collusion (violation of the Fair Trade Act) is considered a disqualification for major shareholders. The core of the revision bill is to exclude violations of the Fair Trade Act from the disqualification criteria for major shareholders of internet-only banks.

The revision bill passed the National Assembly's Political Affairs Committee in November last year but was held up at the final hurdle, the Legislation and Judiciary Committee. This is due to opposition from some quarters who argue that excluding the Fair Trade Act from the major shareholder screening completely undermines the financial business law system.

K-Bank has been struggling with financial difficulties since its opening in April 2017. As of the end of September last year, K-Bank's Basel III (BIS) capital adequacy ratio was 11.85%, the lowest in the industry.

According to banking supervision regulations, if the BIS ratio falls below 10.5%, dividend restrictions are imposed, and if it falls below 8%, financial authorities take management improvement measures. Due to capital issues, K-Bank has sequentially and temporarily suspended the sale of new loan products since April last year.

If the revision bill does not pass this temporary session, it is highly likely to be discarded. A K-Bank official said, "We are exploring various solutions to resolve the financial difficulties assuming multiple scenarios, but the fastest way is the passage of the revision bill."