Bank ownership to be liberalized

It is believed that the policy of the Ministry of Finance and Economy to increase the ceiling of bank ownership has something to do with the schedule for financial and corporate restructuring.

Starting in 2002, the government is required to sell its holdings of bank stocks, and it is urgent to foster specialized banking institutions, as the financial holding company law passed the National Assembly.

Currently, Koreans could purchase up to a 4% stake in a bank. On the other hand, foreigners could purchase up to 10% in a single bank. After the nation's foreign exchange crisis, the foreign ownership ceiling was expanded, while ownership by Koreans was reduced to 4% from 1995's 8% in order to restrict the control of banks by chaebol groups.

The ministry is expected to submit a revised bank law before the end of the year at the latest. It is expected that ownership limit for banks would rise to more than 8%.

The government is required to sell off its bank stocks by 2002 under the current schedule. If the ownership is restricted to 4%, it would be difficult for the government to sell its holdings of banks stocks because private firms might not purchase bank stocks if they are unable to become involved in the bank's management.

Still, it is worried that chaebols might control banks. Officials of the ministry said that there is a possibility that chaebol groups might control banks, noting that it is necessary to prevent such a problem by strengthening the supervision of major shareholders.

Choi Young-Hae moneychoi@donga.com