[THE INVESTOR] Korea’s National Assembly passed a controversial bill on Sept. 20 allowing non-financial companies to own up to 34 percent stake in internet-only banks, raising it from the current cap of 4 percent.

Korea’s two internet-only banks -- K bank and Kakao Bank -- both launched last year, are expected to accelerate their growth which has been hampered by the ownership ceiling because their two biggest shareholders, KT and Kakao, respectively, are unable to buy new shares in the rights offerings.

Despite easing the ownership limit, family-owned conglomerates, known as chaebol, will not be allowed to raise their stake in internet-only banks in principle.

As an exception, information and communications technology-focused companies will be subject to the deregulation, a move designed to open the door for IT firms to enter the web-only banks business.

Major civil activist groups have opposed the passage of the bill, saying it is in violation of the principal of the bank-commerce separation, and called for President Moon Jae-in to veto the bill.

The activist groups, including the People’s Solidarity for Participatory Democracy, said the new legislation fails to clearly state the ban on chaebol ownership as it has to be specified through ordinances.

Financial Services Commission Chairman Choi Jong-ku said on Sept. 21 that the government will issue clear decrees so that chaebol cannot use such banks as private coffers.

He also noted that preliminary approval will be granted next year for two new internet-only banks, with plans to receive applications in February or March next year.

“After appropriate assessment procedures, I expect preliminary approval to be granted for two more internet-only bank in April or May next year,” Choi said.

By Park Ga-young (gypark@heraldcorp.com)