Regulator says only minor regulatory changes will take place to enable U.S. financial firms offer services in Korea
The financial industry will see a limited impact from the trade pact between Korea and the U.S., with only minor regulatory changes to take place enabling U.S. financial firms to offer services here, the Financial Services Commission said.
“There were only a few barriers left in the market even before the free trade agreement,” a FSC official said.
“Major changes include allowing cross border selling of insurance products and sharing customer information with U.S. financial companies so that they can start businesses here without opening a branch in Seoul,” an official at FSC said.
The Korea-U.S. FTA, which took effect on March 15, is pushing banks, insurance companies, asset managers and other financial institutions in both countries to share more information about customers, markets and regulations. The deal allows financial institutions to offer services to customers in both the U.S. and Korea without operating where the customer is based.
“The sharing of customer information will be allowed under a set of conditions including a ban on reuse and strict privacy restrictions,” he added.
While the financial sector isn’t likely to see immediate benefits from the trade pact, analysts sees it as a chance to upgrade the industry over the long run as they work hand-in-hand with world-class banking institutions.
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A bird’s eye view of Yeouido — Korea’s financial hub where the Korea Exchange and brokerages are based (Lee Sang-sub/The Korea Herald) |
“The sharing of customer information will push Korean companies to work with U.S. ones and Korea’s strength in information technology could drive this chance into a new business,” said Kim Byung-deok, a research fellow at Korea Institution of Finance.
The KORUS FTA follows a similar pact with the European Union last year. Korea has become the only country to sign a trade agreement with the U.S. and the EU. The Korean government expects the KORUS FTA to raise the country’s gross domestic product by an additional 5.66 percent over the next decade.
The insurance industry is expected to benefit from the overall increase of trade. The pact will open up new trade opportunities in goods and services across the marine transportation, airline and car industries, which will increase insurance on cargo. In the case of the Korea-Chile FTA, which took effect in 2004, annual trade increased 25.9 percent on average with a 19.4 percent insurance payment expansion each year, the Korea Insurance Development Institute said.
The FSC says supervision of insurers will be tightened as their potential markets grow. With the trade pact, insurance products from Postal Savings and Insurance, National Credit Union Federation of Korea, and the National Federation of Fisheries Cooperatives will no longer be regulated by the Ministry of Knowledge Economy, but rather the FSC. Insurance products from these credit unions and cooperatives will need to be assessed by the FSC before launch and fully comply with the rules set by the regulator.
Those who haven’t yet launched variable life insurance or non-life insurance products won’t be able to do so without approval from the FSC starting Thursday.
Kwon Hyouk-se, chief of Financial Supervisory Services, said the effects of the KORUS FTA would grow in the future.
“The deregulation is expected to help local banks team up with bigger players in the U.S. and such partnership may help them to advance into new countries,” Kwon told The Korea Herald in a recent interview.
By Cynthia J. Kim (
cynthiak@heraldcorp.com)
