Expanded Domination of Foreign Financial Companies

Mr. H, living in Daechi-dong, Kannam-gu, Seoul, bought a ‘whole life insurance’ from the Prudential Life Insurance Co., and have a Citi Gold Membership by depositing 0.1 billion won in Citi Bank. Even though he does not have to get a loan presently, if needed, he thinks of loaning on a real property from HSBC. But Mr. H insured himself in Samsung Life Insurance, and had an account with Commercial Bank for deposit and loan 5 years ago.

More people are seeking for foreign financial companies. According to financial circles on 6th, equity holding ratio of foreign banks increased to 7.6 percent by1.2 percent over 1999 (6.4 percent) at the end of 1999. The deposit ratio of banks increased from 1.1 percent to 1.7 percent, and the profit ratio of life insurance companies rose from 5.0 percent to 5.5 percent.

The Seoul branch of Citi Bank raised the interest rate of fixed deposit by 0.3 percent from 6.0 percent to 6.3 percent on April 3. The Citi Bank’s decision was diametrically opposite to Kookmin Bank, Housing and Commercial Bank (H & CB), Nonghyup (National Agricultural Cooperative Federation, NACF), etc. that lowered the interest rate of fixed deposit competitively.

HSBC holdings Inc. exempts from the cost of collateralization for pre-established liability, while bringing down the interest rate of housing collateralization from 8.5 percent to 7.9 percent. Following HSBC, banks including H & CB, and life insurance companies including Samsung Life Insurance also exempt from the cost of collateralization and is lowering the interest rate. Prudential Life Insurance introduced ‘whole life’ that is a new insurance commodity in Korea, and made it a key commodity of life insurance.

That the foreign financial companies can expand successfully their influential in Korean financial market, resulted from taking precedence over domestic financial companies having poor customer service, by applying the advanced financial techniques to satisfy customers to Korean market. Foreign financial companies maximize their influential by concentrating on special sections. Among stocks listed on the Korea Stock Exchange, foreigners’ stock holdings reached 63 trillion 6.2 billion won, 30.2 percent of total in March.

Foreigners’ holding ratio of major superior banks went beyond 50 percent, as shown in that foreigners’ holding ratio reaches 61.62 percent in Kookmin Bank, 62.40 percent in H & CB, 50.36 percent in Shinhan Bank, and 66.0 percent in Koran Bank.

The foreigners’ holding ratio of Samsung Electronics (58.3 percent), SK Telecom (48.95 percent), and Hyundai Motors (52.24 percent) which have high influential on composite stock index, passed over 50 percent. Therefore, the phenomenon that composite stock price fluctuates according to foreigners’ purchasing and selling, is taking place repetitively.

Foreign financial companies have prevented a banking incident and insolvent obligation via strict internal controls, and as a result they could acquire a good image being clear and superior, which in turn helped their leap in Korean market.

The ratio of insolvent obligation of the Seoul branch of Citi Bank is presently less than 0.5 percent. It shows stark contrast that the ratio of insolvent obligation of the banks supported by public fund is more than 10 percent, and the ratio of superior banks such as Kookmin Bank, H & CB, Koran Bank, etc. is 5 percent.

Such an affair as a banking incident, over 50 billion, in Hanvit Bank can hardly take place in foreign companies.

Citi Bank and DBS is in pursuit of acquisition of Korea Exchange Bank Credit Service (KEBCS) so that it is prospected that foreigners’ influential will spread into credit card business. Seoul Bank and Korealife Insurance are also pursuing overseas sale,

Chohung Bank and Hanvit Banke supported by public fund, and Kookmin Bank and H & CB are also probably selling their stake. It means that people using foreign banks, insurance companies, stock companies, and credit services will increase more and more.

hcs@donga.com