SEOUL: South Korea plans to slash the number of financial sector regulations with a sweeping new law that will enable companies to combine equities and derivatives trading with asset management and investment banking.
The Capital Market Consolidated Act will significantly liberalise the non-banking financial industry, part of the government's plans to make Seoul a financial hub in north-east Asia.
"The twin pillars of the act are opening and competition, with the purpose of giving financial firms a freer hand in the development and marketing of products," Han Duck-soo, finance minister, told reporters.
Analysts described the move as a step in the right direction but said Seoul was still decades behind global standards.
The new measures will replace six laws governing financial services with one piece of legislation, while cutting the number of regulations from 300 to about 190.
Financial institutions will be allowed to conduct many kinds of financial services, including investment banking, wealth management, principal investment, securities services and trust services. The law will also ease regulations on the scope of underlying assets for investment funds.
Shares in stock brokerages rose early this week strongly on the news.
Park Jong-su, president of Woori Investment, said the new rules would provide fresh opportunities. "In two to three years, some securities firms with large capital bases and good products may turn into huge investment banks," he said.
The bill would also enhance market transparency rules, the minister said.
Coming on the heels of regulations allowing financial firms to set up holding companies, the act is part of the government's plans to strengthen its financial sector and become a regional financial hub.
"The underdeveloped financial industry such as securities, futures and asset management sectors has failed to support the development of financial markets and narrow the gap between financial industry sectors," the ministry said.
The bill will be submitted to the National Assembly in the second half of this year and is expected to come into effect in 2008. Plans for insurance sector deregulation are also in the pipeline.
Hank Morris, a business adviser in Seoul, said the changes would bring the South Korean financial sector more into line with the global standard by allowing modern financial companies -- the Korean equivalent to J P Morgan -- to form.
"But in the west these barriers were broken down a generation ago, so Korea is still lagging 20 or 30 years behind," he said.