The South Korean financial authorities plan to introduce regulations limiting the largest shareholder's stake in savings banks with assets exceeding 20 trillion won to enhance public accountability.
On the 23rd, the Financial Services Commission of South Korea announced plans to implement regulations on the significant shareholders of savings banks with assets exceeding 20 trillion won. The new rules aim to limit the maximum stake of the largest shareholder to below 50%, enhancing public responsibility in these financial institutions. This is part of a broader strategy to rationalize existing regulations around the governance and soundness of savings banks, ensuring they align more with their foundational purpose of supplying funds to the public and small businesses.
The proposed regulations include a tiered approach to shareholder limits based on asset scales. For savings banks with assets over 20 trillion won, the maximum stake would be capped at 50%, reduced further for those with even larger asset bases. Currently, the average stake of the largest shareholders among savings banks stands at 94%, with some institutions having maximum stakes of 100%. The initiative responds to the increasing prominence of larger savings banks, like SBI Savings Bank, which, while currently below the regulatory threshold, indicates a clear direction for the financial industry towards stricter ownership governance.
Additionally, the government aims to reshape the lending structure of savings banks, which have been heavily skewed towards real estate and construction, comprising 45.2% of corporate loans. To address this imbalance, regulators will increase the allowance for unlisted stock holdings from 10% to 20% of capital, encouraging investment in innovation and growth industries. They will also expand the definition of eligible borrowers from just small businesses to include mid-sized companies, thereby enhancing the corporate financing capabilities of savings banks and improving lending in non-capital region areas.
