“Reverse Discrimination Against Local Capital Should Stop,” Bankers Say

Banks around the nation demanded an end to what they call a reverse discriminatory policy banning local financial capital, such as one for industry, from entering into the local financial industry in response to the increasing encroachment of Korea’s financial industry by international capital.

Their demand appears to have added fuel to the debate over whether or not local capital will be given more opportunities to penetrate the local financial industry as it shows that the debate, which has once been limited to conglomerates, now spreads into the financial industry.

In a policy coordination meeting on December 16 with governor Park Seung of the Bank of Korea, major bankers around the country emphasized the current restrictions on the management and ownership structures of banks should be reconsidered as they actually represent a case of reverse discrimination against local capital for its international counterpart.

“While foreign capital’s penetration into the local banking industry is a natural trend, local capital should be allowed to join the trend for balance reasons,” they said while voicing concerns, adding, “International strategic investors who aim to actually manage financial institutions in the country could chip away at the upscale clientele from the locals with worldwide networks, high credit ratings, and high financial technologies.”

“The debate surfaced as we raised concerns that there is little local participation in the sale of the government’s share in Kookmin Bank and that the government should sell its share in Woori Financial Group by March of next year to complete Woori’s privatization,” said a banker who attended the meeting. “We have raised an issue of reverse-discriminative measures including the four percent ceiling on local industrial capital’s share in a bank.”

At the meeting they said, “To get rid of bad loans, the spread between a bank’s savings and loan rates should be lowered to an appropriate level.” The spread hovers around 4 percent in the U.S. while it is about 3 percent in Korea.

The meeting was attended by CEO Lee Dock Hoon of Woori Bank, CEO Kim Seung Yu of Hana Bank, CEO Choi Dong Su of CHB, and acting president Lee Dal Yong of Korea Exchange Bank and CEO Ha Young Gu of Koram Bank.

Joong-Hyun Park sanjuck@donga.com