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President calls for Regulatory Reform for Internet-only Banks

#Hot Issues of the Week l 2018-08-12

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ⓒYONHAP News

Presidential Spokesman Kim Eui-kyeom said Wednesday that President Moon Jae-in's call the previous day to deregulate Internet-only banks hasn't deviated from his campaign pledge.

Kim said Moon had promised to advance the financial industry and to create an environment where qualified businesses can freely enter the online banking sector.

Moon on Tuesday called for steps to deregulate the financial sector and remove barriers for the entry of new businesses such as Internet-only banks.

Nonfinancial companies are currently limited from each owning more than a ten percent stake in the country's online banks and wielding voting rights of more than four percent. 

The regulations are aimed at preventing conglomerates from abusing the system through acts such as borrowing large unsecured loans at relatively low interest rates.

Moon said, though, that such regulations can act as a barrier to new businesses looking to enter the financial market and may prevent fair competition, hinting that they may be lifted.  

However, progressive political parties and civic groups argue that such deregulation may beef up the interests of family-based conglomerates that may treat online banks as their own personal piggy banks.

Some economists are also skeptical, claiming the government’s proposed complementary measures to cushion the side effects from the deregulation are insufficient.

Ruling Democratic Party Chairwoman Choo Mi-ae has dismissed such claims, saying that there are mechanisms to confine the roles of major shareholders and to prevent insider trading.

She stressed that the regulatory reforms based on innovation-led growth policies will not breach the principle of economic democratization.

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