Brief of Banking Act in the Republic of Korea (South Korea)
(noted from the world bank group documents)
Enactment: This Act was enacted on May 5, 1950, as Act No. 911, in order to contribute to
stability of the financial markets and development of the national economy by ensuring the sound
operation of banks, by elevating the efficiency of their financial intermediary functions, by
protecting the depositors, and by maintaining an order in credit transactions.
Amendment: This Act was wholly amended on January 13, 1998 and then has arrived at its
present form as the result of being amended nine times. The latest amendment was on April 27,
Any person who intends to carry on the banking business shall have capital stock of not less
than 100 billion won, subject to authorization of the Financial Supervisory Commission.
The Financial Supervisory Commission shall grant authorization for bank establishment upon
verifying the feasibility of business plan, the propriety of capital stock, stockholders' composition,
and stock underwriting funds, and the managerial ability, fidelity and public interest orientation of
the promoters or management.
A stockholder and the same person in a special relationship with such a stockholder shall not
own stocks of a bank in excess of 10 percent of the total number of its issued voting stocks:
Provided, That they may own more than 10 percent of such stocks, subject to approval of the
Financial Supervisory Commission.
A bank shall observe the management guidance standards set forth by the Financial
Supervisory Commission in order to secure the adequacy of capital, the soundness and liquidity of
assets, and the soundness of management. The management guidance standards set forth by the
Financial Supervisory Commission shall fully reflect the principle of asset quality for financial
institutions which is recommended by the Bank for International Settlements.
A bank shall not grant a credit line in excess of 25 percent of its equity capital to the same
individual/corporation and persons who share the credit risks with him/it (the same borrowers).
For the purpose of preventing the control of a bank by a non-financial business operator
(industrial capital), such operator may not hold more than 4 percent of the stocks of a bank:
Provided, That such operator may own such stocks up to 10 percent if such operator obtains
approval from the Financial Supervisory Commission therefor after satisfying the requirements of
financial soundness, etc. on condition that he will not exercise any voting rights to the stocks in
excess of such 4 percent.
The Financial Supervisory Commission may examine whether or not a stockholder holding
more than 10 percent of stocks of a bank is eligible for such holding, and if it finds him ineligible
for such holding as a result of such examination, order him to dispose of the stocks of the bank
held by him in excess of such 10 percent.
An officer or employee of a bank may concurrently hold the post of an officer or employee of
its subsidiary in the light of the efficient management of the bank, and a bank is allowed to acquire
stocks of another bank for enlarging its scale and promoting its multiple management.
The credits which a bank can extend to all of its large stockholders shall not exceed 25
percent of the relevant bank's equity capital. Where a bank intends to extend each of its large
stockholders credits of not less than a certain amount, it shall do so after obtaining a concurrent
vote of all the members of its board of directors.
A bank shall set forth the standards and procedures (internal control standards) to be
observed by its officers and employees in performing their duties, in order to observe laws and
regulations, conduct a sound asset operation, and protect the investors.
A bank shall place one or more compliance officers and establish an audit committee in order
to verify and investigate whether or not its officers and employees observe the internal control