Deregulation Set for Non-banking Holding Firms

Insurance holding companies will be allowed as early as next year to add manufacturing firms.

This will allow the Samsung Group, the country’s largest conglomerate, to set up the tentatively named Samsung Holding Co. without difficulty.

Samsung Life Insurance is likely to be the holding company and other Samsung firms, including Samsung Electronics and Samsung Corp., will be subsidiaries.

In his policy report to President Lee Myung-bak, Financial Service Commission Chairman Jun Kwang-wu announced plans to ease regulations on non-banking holding companies and rules banning firms from securing controlling shares in banks.

“We’ll revise the Financial Holding Company Act that prohibits non-banking holding companies including insurance and securities firms from having non-financial firms (manufacturers),” a commission official said.

“If we ease regulations on non-banking holding companies, it will encourage the Samsung Group to transform itself into a holding firm, thus raising transparency in corporate governance.”

Insurance firms have played an effective role as holding companies for the Samsung, Dongbu and Tongyang groups. Current law, however, prevents the conglomerates from turning themselves into holding companies.

Private equity funds that have industrial capital accounting for under 10 percent are considered financial capital. The cap will be raised to 15 percent in the second half of the year.

The bank ownership cap will go up to 10 percent from four percent.

President Lee said, “Many people have misunderstood that the government is trying to allow non-financial holding firms to benefit certain large corporations. If the government hesitates to revise regulations due to public sentiment, it cannot deal with the problem at all.”

“The financial sector has lagged behind since the government intervened in the market. The public can feel the changes only after the government pursues large-scale reform, instead of gradual changes.”

larosa@donga.com ddr@donga.com