[Interview] Yeo Hong Seok-jun: "We Will Review Financial Regulations Including Geumsan Separation"

Hong Seok-jun, Head of Regulatory Reform Task Force of the People Power Party

"To Revitalize Investment,
Regulations Must Ultimately Be Relaxed"
Attending Financial Industry Meeting Tomorrow

Hong Seok-jun, Member of the People Power Party. / Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Lee Hyun-joo] On the 27th, Hong Seok-jun, a member of the People Power Party and head of the Regulatory Reform Promotion Team, will attend a meeting with the financial industry organized by the party's Policy Committee to explore ways to ease financial regulations. Considering that the promotion team has just been formed, this can be seen as the ruling party viewing finance as the first target for deregulation. It is also evaluated as aligning with the intention to catch two rabbits?improving people's livelihoods and restructuring the industrial framework?by easing regulations. In an interview with Asia Economy on the 26th, Representative Hong said, "We will discuss issues such as the separation of banking and commerce (Geumsan Separation), bancassurance, and capital requirements for institutions," adding, "To activate investment, regulations ultimately need to be eased." Under the current principle of Geumsan Separation, financial holding companies cannot hold more than 5% of shares in non-financial companies, and banks and insurance companies cannot invest more than 15% in other companies. Especially in the financial industry, voices are growing to reconsider the Geumsan Separation regulation, citing the entry of companies like Naver and Kakao into the financial sector. Thirteen people from asset management, real estate trusts, and others, including Choi Hyun-man of Mirae Asset Securities and Choi Hee-moon of Meritz Securities, will attend this meeting.

Below is a Q&A with Representative Hong.

- What financial regulations will be discussed at the financial industry meeting?

= Since the financial system itself is created according to national institutions, there are so many regulations that it is hard to distinguish whether something is a regulation or not. Even the depositor protection system can be considered a regulation depending on its nature. Short selling is also related to credit issues among the 2030 generation but has regulatory aspects. This time, issues such as Geumsan Separation, bancassurance, and capital requirements for institutions, which financial companies have long proposed, are expected to be addressed.

- Earlier, the party leadership urged banks to reduce the interest margin between deposits and loans. Isn't that contradictory?

= The party made that statement because the burden on the lower-income class has significantly increased during the interest rate hike period. Regulatory reform discussions focus on areas where financial companies desire reform. When managers are guaranteed autonomous management, companies invest. Government regulatory policies inevitably have a negative impact on the economy.

Hong Seok-jun, Member of the People Power Party. / Photo by Yoon Dong-joo doso7@

- Are companies moving overseas because of regulations?

= When companies are viewed as so-called 'deep-rooted evils,' and regulations increase, businesspeople lose the will to invest. When investing overseas, they receive a kind of 'envoy' treatment, so there is no reason to do it domestically. Ultimately, good jobs are moving overseas. The government has regulatory impact assessments, but the National Assembly Act treats them as discretionary provisions. Ultimately, a system that can continuously evaluate regulations through sunset clauses is necessary. It is undesirable for regulations once created to persist indefinitely.

- The conflict over pros and cons of regulations is expected to be intense.

= I once held a meeting with the Korea Regulatory Science Association, and both professors and experts said that regulatory reform sounds easy but is actually difficult due to vested interest groups. It is important to decide on the methods and principles to follow. Even with telemedicine, the COVID-19 situation was seen as a good opportunity to introduce it. However, medical organizations oppose it. If telemedicine proceeds, most patients will flock only to large hospitals, causing a sharp decline in income for small and medium-sized hospitals. Alternatives to alleviate such concerns must also be sought. For example, excluding large hospitals from telemedicine or recognizing fees when small and medium hospitals conduct remote consultations could be ways to persuade them.