Banks in South Korea will see eased regulation when opening physical offshore units, as a revision bill gained approval from the Cabinet on Monday.
Following the revision of the Enforcement Decree of the Banking Act, banks will be exempt from the obligation to report to authorities about the establishment of foreign offices or branches prior to the setup, unless the investment into the foreign unit exceeds 1 percent of its capital.
Before the revision, banks were required to submit a report if either the bank’s BIS capital adequacy ratio stood at below 10 percent or the foreign country’s credit rating was below B+.
The move is expected to relieve the regulatory burden and help banks embark on offshore business “at the right timing,” according to the Financial Services Commission, a financial regulator and policymaker.
Between January 2014 and September 2016, 14 out of 23 cases of banks opening overseas units were required to be reported to the authorities. Based on the new criteria, only two of those 23 cases would have been required to report.
The revision also puts the licensing of foreign banks when creating, moving or shutting down local branches, under the authority of the governor of the Financial Supervisory Service, a monitoring unit of the FSC.
The revision will come into effect upon promulgation, according to the FSC.
By Son Ji-hyoung