Korean Insurers Granted Permission to Invest in Foreign Banks

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South Korea’s financial authorities are easing restrictions on overseas subsidiary investments, aiming to bolster the international expansion of domestic companies. This move allows insurers to own foreign banks under the newly relaxed regulations.

During the 8th Financial Regulation Reform Meeting, the Financial Services Commission (FSC) of Korea deliberated on regulatory improvements to facilitate the global growth of financial firms. Among the key changes proposed is the widening of the scope of overseas subsidiaries that financial entities can possess.

As per a report by Business Korea, restrictions on investing in foreign financial and non-financial firms by banks, insurers, and other entities will be loosened, adhering to the legal constraints of overseas jurisdictions. The objective is to enable Korean financial institutions to compete effectively in foreign markets by diversifying their services to meet local financial needs.

Under the updated regulations, insurance companies may now own foreign banks, and fintech subsidiaries can acquire overseas entities engaged in investment advisory and asset management services. Additionally, the FSC aims to relax restrictions on capital support to overseas subsidiaries.

Insurers will also be permitted to provide collateral for their subsidiaries. They can offer government bonds and similar securities as collateral to local banks, which will then guarantee the debt of overseas subsidiaries. This mechanism allows for operational funding through a guarantee-based system, replacing the current regulation where insurers can only guarantee debt for their subsidiaries.

In parallel, discussions are underway regarding potential amendments to local laws amid concerns about foreigners exploiting loopholes in South Korea’s private healthcare insurance services.