Korea to ease subsidiary investment rule to boost foreign entry

Financial Services Commission (FSC) Chairman Kim Joo-hyun attends the 8th conference on financial regulatory innovation held at the Seoul Government Complex in Seoul on July 17. [Photo by Yonhap]

South Korea will lift restrictions on domestic financial companies investing in overseas subsidiaries and ease merger regulations on savings banks to allow them to operate in more regions and gain greater competitiveness.

The Financial Services Commission (FSC) held its eighth conference on financial regulatory innovation on Monday and unveiled such measures aimed at regulatory improvement.

The measures include easing regulations on share ownership in non-financial companies to allow banks to own non-financial subsidiaries overseas and financial holding companies to own overseas non-financial subsidiaries.

Insurance companies are also currently required to obtain approval from the FSC to own subsidiaries in areas unrelated to insurance, but the government plans to expand the scope of subsidiary ownership and simplify the process to remove uncertainty in overseas investment.

Limits on inter-subsidiary contribution will also be relaxed for a certain period of time to support credit provision to overseas subsidiaries.

Currently, insurers are prohibited from providing collateral to overseas subsidiaries but they will be allowed to do so on a limited basis going forward.

The risk value for the net capital ratio (NCR) had been uniformly set at 100 percent when a securities firm’s overseas subsidiary provides credit, but they, like their parent companies, will be applied a differentiated value between 1.6 percent and 32 percent depending on the credit rating of the counterparty.

It will also become possible to sell loans receivable of domestic financial companies to overseas financial companies.

The FSC will also ease the reporting and disclosure requirements of financial companies for the same direct overseas investment to reduce duplicate reporting and disclosure.