Reason for proposal and main contents

Following the withdrawal of Chungcheong Bank (in 1998) and Chungbuk Bank (in 1999) amid the restructuring of Korea’s financial institutions in the wake of the foreign exchange crisis, no local bank has been licensed for the past 23 years. Particularly, the imbalance in local financial services is serious due to the absence of local banks in the Chungcheong region.

The capital outflow from Chungcheong region ranks 1st in Korea (some KRW 23 trillion flowed out of Chungcheongnam-do Province in 2020) due to its poor financial economy. Additionally, liquidity supply to SMEs and microenterprises in the region has deteriorated.

The establishment of local banks has not been licensed due to the current rule that requires their establishment to be led by local entities in view of the characteristics of the local banks, and also excessively restricts (up to 15% or less of the total voting shares issued by a bank) the holding of equity shares in local banks by the same person or non-financial major promoters under the current statute. 

Therefore, the proposed revision is designed to provide a realistic way of helping to promote the establishment of local banks by relaxing the restriction on the holding of their voting shares by non-financial major promoters up to 34% of the total shares issued, while raising the required total paid-in capital to KRW 100 billion, which is the same as the limit under the current Act on Special Cases Concerning Establishment and Operation of Internet-only Bank (Article 8 (2) 1 proviso, Article 15 (1), and Article 16-2 (1) of the Draft).