Korean Regulators Approves K Bank Recapitalisation Plan

Source: Regulation Asia Editors, Regulation Asia 2020-07-23

K Bank’s recapitalisation plan was halted last April, forcing Korea’s first internet-only bank to stop offering loan products. It is now looking to regain ground lost to Kakao Bank.

South Korean financial authorities have approved a recapitalisation plan for K Bank, Korea’s first internet-only bank.

The bank’s original recapitalisation plan was for its operator, mobile carrier KT Corporation, to raise its stake from 10 percent to 34 percent, the maximum allowed under a new law passed in September 2018. Previously, non-financial companies were only allowed to hold up to a 10 percent of voting rights in a financial firm.

The recapitalisation plan was halted last April due to KT Corporation’s history of antitrust violations, which prohibited it from owning more than 10 percent in a financial firm, and K Bank halted its lending services due to a capital shortage.

Under the new plan, BC Card – which is almost 70 percent owned by KT Corporation – led K Bank’s recapitalisation effort, in the process acquiring KT Corporation’s 10 percent stake.

Woori Bank, currently the largest K Bank shareholder with just under a 14 percent stake, was initially reluctant to participate in the recapitalisation, but last month it agreed to participate on the condition that it be allowed to buy convertible preferred shares.

“BC Card has met the standards in three categories, including financial stability and social credibility, to receive approval. Woori Bank also qualifies for criteria on financial stability and social credibility,” the FSS (Financial Supervisory Service) reportedly said on Wednesday (22 July).

The FSS is under the broad oversight of the FSC (Financial Services Commission), which likewise released a statement on Wednesday announcing its decision to approve the transactions.

Once the transactions are complete on 28 July, BC Card will own 34 percent in K Bank, making it the biggest shareholder, while Woori Bank will own 19.9 percent. K Bank’s capitalisation will increase from KRW 500 billion to KRW 900 billion, providing the bank KRW 400 billion of fresh capital.

At the beginning of this month, K Bank relaunched its lending services, raised the savings limit, and introduced a checking account service that allows customers to trade bitcoin on crypto exchange Upbit.

K Bank is looking to regain ground against Kakao Bank, Korea’s second internet-only bank, which last July received approval for its operator Kakao to raise its stake in the bank to 34 percent. Kakao also operates a popular messaging app in Korea known as KakaoTalk.

In December, the FSC granted a preliminary licence to the Toss Bank consortium, allowing it to set up and operate Korea’s third internet-only bank. The consortium is led by Viva Republica and includes KEB Hana Bank, Hanwha Investment & Securities, Standard Chartered Bank Korea, Welcome Savings Bank, Ribbit Capital, the Korea Federation of SMEs and other affluent institutional investors as shareholders.

FSS

K Bank

Korean Regulators Approves K Bank Recapitalisation Plan

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