'Banking Sector Management and Business Practice System Improvement Plan' Task Force (TF)
Domestic Banks to Announce Overseas Expansion Plans Within This Month
Kim So-young, Vice Chairman of the Financial Services Commission, is giving a briefing on "Measures to Improve Banking Sector Management, Business Practices, and Systems" at the Government Seoul Office in Jongno-gu, Seoul, on the 3rd. Photo by Yoon Dong-joo doso7@
The financial authorities have decided to activate asset management services such as investment advisory provided by banks. They plan to introduce convergence services between financial and non-financial sectors through banks and also expand banks' venture investments. This measure comes from the background of reducing banks' dependence on interest-based profits.
On the 5th, the financial authorities' 'Banking Sector Management and Business Practice Improvement Task Force (TF)' announced plans to activate banks' investment advisory business. The method involves analyzing customer information shared through MyData and then providing customized product recommendation services. While previously only real estate-related advisory was possible, from now on, advisory on financial products will also be allowed.
Kim So-young, Vice Chairman of the Financial Services Commission, said, "We will expand the assets eligible for trusts and support the creation of various trust products by collaborating with non-financial specialized firms such as hospitals and accounting firms." She added, "To this end, we will submit a revision bill to the Capital Markets Act to the National Assembly within the second half of this year." The path for banks to enter non-financial businesses will also be opened. The Financial Services Commission plans to announce detailed measures within the third quarter of this year.
This month, the regulation on the investment limit for banks' venture funds will also be raised. The key point is to relax the limit from within 0.5% of their own capital to within 1.0%. Last year, the five major commercial banks' venture investment amount was 775.8 billion KRW.
The path for domestic banks to expand overseas will also be opened. As of the end of last year, the number of overseas branches of domestic banks was 207. The net income from overseas branches accounted for less than 10% of the total net income of the banking sector.
Vice Chairman Kim said, "We will improve regulations so that overseas branches or subsidiaries can compete equally with local financial companies and that overseas business activities are not restricted by domestic laws," adding, "We plan to announce improvement measures within this month."
These policies stem from the intention that domestic banks should move away from the practice of earning money based on the interest margin between loan rates and deposit rates. The proportion of interest income in the total profit of domestic banks increased significantly from 88% at the end of 2018 to 94.3% at the end of 2022.
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