SK, Lotte, Hyundai to enter card biz soon

Tectonic reshaping in the credit card market is pending. New entry of the business, which has been prohibited since 1989, will be completely opened on the second of this year. After preparing for the new entry to the credit card business, SK, Lotte, Hyundai Motor, and foreign banking corporations are expecting to devote their full energies.

Financial Supervisory Commission announced that it would allow new entries of the credit card business on the second half of this year after setting a better condition of permission criteria. The Commission is also planning to lower the standard for the approval of new entries in a few years. Lee Wu-chol, the director of Financial Supervisory Policy Bureau 2, said that the new system is purposed to increase the competition in the related banking sectors and eventually will result in autonomous reduction of their commission.

However, the three domestic groups are expected to run a tough road to enter the new business. SK and Lotte are hindered by the standard which requires of `over 150 thousand banking customers at the time of a new approval. Hyundai Capital of Hyundai Motor Company, holding 14 percent share of Hyundai Life Insurance, seems also to be deterred by the article, `no responsibility for insolvent enterprises.` SK and Lotte declared, however, that they will do their best to get an entry even though the standards set by the government are favorable to qualified foreign banks.

Ham Jung-sik, the director of Planning and Management Dept. of Hyundai Capital, also stated that Hyundai Capital would join this business even at the price of probably more than 10 billion won of its apportion for responsibility of the insolvent enterprise. Meanwhile, FSC decided to regulate the ratio of auxiliary businesses such as ATM service on purpose of reduce the side-effect on that the credit card corporations have been more enthusiastic about the businesses of card loan and ATM service than their regular business.

FSC is also to reduce the charges of credit cards, which seem too high, to a reasonable price. It will build a team to survey the cost price and margin of credit card corporations.

FSC will amend the Loan business law for the purpose of that the customers, who report to a business office the theft or lost of their card in 2 days after they recognized, will be responsible for only a portion of amount.

In addition, FSC also, to stop the reckless issuance of credit cards, will prohibit the acts of `collecting members in other places than their banks and affiliated banks,` `urging membership on the condition of such as a loan transaction,` `offering gifts,` `re-issuance of credit card without an approval of members.` FSC has not allowed Chebul’s entry to this business for fear of being blamed for a preferential treatment to Chebul or an encouragement of over-consumption.

New standards for the establishment of credit card corporations

In case of banks, the ratio of asset over 10 percent by Bank of International (BIS) standard: Over 120 percent of necessary asset ratio for financial holding companies, over 230 percent of its net business asset for the security corporations, over 150 percent of the payment ability ratio for the insurance companies, under 180 percent of liability ratio for other corporations, over 150 thousands of banking customers at the time of the application, over 80 billion won of asset including legal asset, more than 30 branches, over 300 experts of financing and computerization.

Lee Hoon dreamland@donga.com