Financial authorities in South Korea are significantly easing restrictions on overseas subsidiary investment to support the expansion of domestic companies. These looser restrictions will result in further investments in foreign financial companies, with insurers being able to own foreign banks under new regulations.
During the 8th Financial Regulation Reform Meeting, the Financial Services Commission (FSC) of Korea discussed regulatory improvement measures to facilitate the overseas expansion of financial companies. One of the key changes discussed is the expansion of scope of overseas subsidiaries that financial companies can own.
According to a report from Business Korea, restrictions on investing in overseas financial and non-financial companies by banks, insurers, and others will be eased within the limits allowed by local laws overseas. The intent is to enable Korean financial institutions to be competitive in overseas markets with the diversification of their businesses to match local financial demands.
Under these new regulations, an insurance company could be permitted to own a foreign bank, or for a fintech subsidiary to acquire an overseas subsidiary that conducts investment advisory and asset management businesses. The FSC is also looking to ease restrictions on capital support to overseas subsidiaries.
Insurers will also be allowed to provide collateral for their subsidiaries. Domestic insurers can provide government bonds and similar securities as collateral to local banks, with local banks then guaranteeing the debt of overseas subsidiaries. This, in turn, enables a substitution for operating funds through this guarantee-based system. Under current regulations, insurers in South Korea can only guarantee debt for their subsidiaries.
Elsewhere in the country, the nation is also discussing possible amendments to its laws as concerns grow over the increasing number of foreigners abusing loopholes in the country’s private healthcare insurance services.
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