Regulator to ease regulations for bank holding firms

South Korea's top financial regulator said Monday it will lift a set of barriers for large banking groups to diversify their business portfolios as part of its broader deregulation drive in the financial industry.

The Financial Services Commission  said a bank affiliate of a financial holding company can sell financial products offered by its sister securities and insurance firms starting later this year.

The bank groups can also set up a bank-brokerage office that provides private financial consulting and asset management services to customers.

Nine bank holding groups, including Shinhan Financial Group Co. and KB Financial Group Inc., have flagship banks and several non-banking affiliates under their wings, but their cross-sector business is limited because the current laws require financial firms to have separate offices with difference entrances.

The FSC said a banking affiliate can also consign its deposit and withdrawal business to its sister bank in order to improve efficiency and business sharing.

"Financial holding companies have missed expectations in diversifying their business portfolios and creating synergy," the FSC said. "The latest move is aimed at encouraging them to engage in cross-sector business and improve their competitiveness."

South Korea's four major banking groups' interest profits from their flagship banks accounted for 85.5 percent of their total profits as of end-2013, compared with 39.1 percent of the four biggest U.S. mega banks, according to the FSC.

The regulator also said it will let their affiliate companies share and exchange customer information in order to improve efficiency.

The FSC has focused on deregulation and reformation in the financial industry, churning out related measures, including the establishment of Internet-only banking and loosening face-to-face identification controls.

Meanwhile, FSC Chairman Yim Jong-yong said that the regulator is mulling reorganizing the Korea Exchange, the country's sole bourse operator, into a holding company to govern the three-pronged stock market system.

Currently, the benchmark KOSPI market is mostly dedicated to large firms, while secondary KOSDAQ and third KONEX serve for mid-sized tech-savvy ventures and startups.

"Basically, I'm considering transforming the KRX into a holding company," Yim said in a meeting with local lawmakers. "It's not aiming at separating the KOSDAQ from the bourse system, but at improving the KRX system to raise competitiveness."

The FSC that oversees the securities market has pushed to reform the bourse system as the tepid secondary and tertiary markets are considered to have failed to finance ventures and startups.

As part of the plan, in January, the government delisted the KRX as a public institution, six years after putting the bourse under its control. (Yonhap)