The Same Service Banks Offer

“The Financial Investment Business and Capital Market Act,” which is expected to bring about extensive changes in the South Korean financial market, is likely to pass the National Assembly.

Thanks to the solution of the “payment of securities firms” problem, which has been an obstacle in the Korean finance sector, the proposal is highly likely to pass a subcommittee that is in charge of deliberating financial bills under the Finance and Economy Committee of the National Assembly.

If the bill passes the subcommittee, it will go through a review at an assembly meeting of the Finance and Economy Committee and the Legislation and Judiciary Committee, and ultimately be submitted to the National Assembly. It is unlikely pass this month, but it is highly likely to in September. If it passes the Assembly, it will be effective from 2009 after an 18-month preparation.

Eliminating the Barriers-

The hottest issue in the bill, the payment of brokerage firms, was addressed by making each firm adopt a retail payment system.

The Ministry of Finance and Economy reported the decision to the subcommittee on Thursday after consultations with the Financial Supervisory Service and the Bank of Korea.

The payment system refers to services such as ATM services, paying bills, automatic payments and credit card payments. So far, banks have argued that only they should be able to have such payment systems.

However, from now on, users can enjoy the same payment services with accounts from securities firms.

The bill proposed by the government to advance the domestic finance industry focuses on eliminating barriers among financial institutions. It aims at breeding large investment banks such as Goldman Sachs and Merrill Lynch and promoting the development of various financial products.

For example, all financial investment institutions will be able to cover all businesses. So far, securities firms, futures commissions merchants, asset management firms, and trust funds share transaction, brokerage, asset management, and investment advice, respectively.

When the act comes into effect, the Korean financial market will be divided into three categories: banks, insurance companies, and financial investment companies.

M&A Expected-

The act is expected to promote mergers among local brokerage firms.

As it is certain that the larger and more specialized companies will draw more money, those firms see the need to expand their size. On the other hand, unspecialized small and medium-sized securities firms will find it difficult to survive.

But the changes will benefit clients. They can enjoy “one stop” service ranging from stocks, fund to futures. In addition they can draw and deposit money, transfer money and use payment services with securities accounts.

Kim Ja-bong, a researcher of the Korea Institute of Finance, said, “The Financial Services Act will create an environment where capital markets can be activated.”