Restructuring Bank Oligopoly... Considering Partial Entry of Insurance and Securities into Banking Operations

Financial Authorities Fully Launch Banking Sector Institutional Improvement Task Force

To alleviate the 'oligopoly system' of the five major commercial banks, financial authorities have begun considering a plan to allow existing insurance and securities companies to partially enter the banking sector.

According to the financial sector on the 27th, the financial authorities recently formed a task force (TF) to improve management, business practices, and systems in the banking sector to discuss such measures. The idea is to permit insurance and securities companies to participate in areas traditionally dominated by banks, such as payment settlements and deposit/loan services, to stimulate competition.

This approach is based on the premise that it will take considerable time for new players to establish themselves through alternatives previously suggested to resolve the banking oligopoly, such as the fourth internet-only bank and small licenses (license segmentation). Therefore, involving existing financial companies could generate competitive effects more quickly.

Kim So-young, Vice Chairman of the Financial Services Commission, stated on the 22nd, "To promote substantial competition in deposits and loans, active participation from other financial sectors such as insurance, securities, and savings banks, as well as the banking sector, is necessary."

Financial authorities are reportedly considering allowing corporate payment settlements for securities companies, insurance companies, and card companies; relaxing the proportion of credit loans to middle and low credit borrowers for internet banks; and expanding loan comparison platforms for big tech companies. In particular, considering the lengthy process of enhancing bank competitiveness through new licenses, they are also contemplating allowing existing secondary financial institutions?such as insurance companies, card companies, securities companies, savings banks, and internet banks?to enter banking fields through license segmentation.

Additionally, to encourage competition among the five major banks, the authorities are reviewing measures such as expanding and strengthening deposit and loan platforms, as well as fostering internet banks and regional banks, which operate the same banking business, as meaningful competitors in the market by expanding their deposit and loan services or increasing branch offices.

Meanwhile, the financial authorities plan to hold weekly working-level meetings to discuss improvement measures following the first TF meeting. Accordingly, various measures to resolve the oligopoly system are expected to be discussed and reviewed until the final plan is released by the end of June.

A financial authority official said, "We have listed possible adjustments to the business areas of each financial sector to enhance bank competitiveness," adding, "It would be difficult to review them one by one, so we plan to coordinate them all at once."