Bank equity ownership ceiling to be up by 8-10%

In line with the timetable for the second round of financial restructuring, the government has decided to raise the bank equity ownership ceiling sharply from the present 4 percent to 8-10 percent.

The Finance and Economy Ministry held a meeting of the banking division of the Deliberation Committee on Financial Development Wednesday at the Korea Federation of Banks Building in Myongdong, central Seoul, and discussed measures to improve the bank ownership structure.

At the meeting, the government decided to revise the related bank law to raise the ceiling within this year at the earliest.

Lee Jong-Koo, a director of the ministry in charge of financial policies, said that participants in the meeting pointed out that the current regulations limiting the bank equity ownership to 4 percent for Koreans are too stiff and also discriminatory, as they allow foreigners to own up to 10 percent. Urgent improvements are therefore needed, he said.

Government officials said that as the government is supposed to dispose of bank stocks it purchased for restructuring in the banking sector by the end of 2002, the bank ownership structure should be reformed ahead of schedule.

A chief of the department of banking systems at the ministry said that ahead of the implementation of the partial deposit guarantee system set for next year, a fierce competition is already underway between foreign and domestic banks. In order to guarantee a fair competition, the government needs to raise the ownership ceiling for Koreans, he explained.

As the increase of the ceiling may result in large conglomerates dominating the financial sector, the government plans to set up a separate device to check such an occurrence.

Choi Young-Hae moneychoi@donga.com