Financial regulator under fire for approving only KB Kookmin, Hana-SKThe Financial Services Commission is being seen as inconsistent in its policy to approve businesses of new credit card firms.
After KB Financial Group launched a stand-alone credit card firm, named KB Kookmin Card, in March 2011, other financial groups and banks have been striving to follow suit.
Among them are Woori Financial, Nonghyup Financial, Korea Development Bank and Standard Chartered Bank Korea.
In January, FSC chairman Kim Seok-dong made it clear that the regulator would not endorse Woori Financial’s move to spin off the credit card unit from Woori Bank.
Kim seemed to stress the principle of fairness when he said “we cannot approve only the launch of Woori Card amid the situation that others like Nonghyup Financial are poised to expand their credit card business.”
The chief regulator also cited the nation’s regulatory policy to curb credit card use and control household debt as reasons for his skepticism about the endorsement of newcomers.
But market participants say it is the FSC that has not been fair, noting the launch of KB Kookmin Card during Kim’s term.
“If financial authorities do not give other players equal opportunity, it would be a preferential benefit to KB Financial,” a local banker said.
He argued that the credit card industry had already been embroiled in fierce competition even before KB Kookmin launched its business in March 2011.
“If the FSC believes KB Kookmin Card has heated up their competition and had a negative effect in terms of curbing household debt, it could be evaluated as a policy failure,” another banker said.
In 2010, Hana Financial Group spun off its credit card unit and launched new marketing activities in partnerships with several SK Group affiliates.
Further, the FSC endorsed Hana Financial’s acquisition of Korea Exchange Bank from Lone Star Funds last January amid reckless rivalry among financial groups to expand their total assets.
Woori Financial, which aims to launch a stand-alone credit card operation, is pinning hopes on an early law revision so that its goal can be reached this year.
Though the group has sought to spin off the card unit from Woori Bank for about a year, it has faced hurdles from the top regulator.
But a revision of laws on credit financing businesses could pave the way for Woori Financial to launch Woori Card without extensive regulatory screening, according to market observers.
In February, lawmakers of the National Policy Committee of the National Assembly held a discussion on the motion, which was proposed by a group of lawmakers last year.
If the revision passes the Assembly after more discussions, a financial group may be allowed to launch a stand-alone credit card subsidiary as long as the unit’s total assets do not surpass 10 times its equity capital.
Though the new legislation is designed to block the reckless expansion of credit card issuers, Woori Card satisfies the guidelines as its total assets are four-fold its equity capital.
Since the first half of 2011, the FSC has also strived to meet the assets to equity capital, also called the leverage ratio, for its new regulatory policy for the credit card sector.
FSC officials reportedly picked the introduction of the leverage ratio as a prerequisite for Woori Bank’s credit card business.
“Woori has yet to apply for the spin-off. I believe the issue should be reviewed in connection with the market situation later,” said an official of the Financial Supervisory Service, an executive arm of the FSC.
By Kim Yon-se (
kys@heraldcorp.com)
