LexisNexis(TM) Academic - Document

LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)

April 4, 2005 Monday
London Edition 2

SECTION: WORLD NEWS; Pg. 8

LENGTH: 455 words

HEADLINE: EU to challenge planned S Korean curbs on bank directors

BYLINE: By ANNA FIFIELD

DATELINE: SEOUL

BODY:


The European Union is drawing up plans to challenge through the World Trade Organisation a South Korean bill limiting the number of foreigners allowed on boards of local banks, according to documents obtained by the Financial Times.

Brussels believes such legislation would violate WTO rules because South Korea has not included any such limitation under the general agreement on trade in services. A WTO official said South Korea would have to prove the change was necessary for prudential reasons to defend such a challenge.

The move comes amid increasing concern that anti-foreign sentiment, sparked by increasing international ownership and greater shareholder activism in South Korea, Asia's third-largest economy, is fuelling changes that unfairly target outsiders. Foreigners own 42 per cent of the local stock market.

Han Duck-soo, South Korea's new finance minister, said his government opposed a bipartisan bill limiting the number of foreign directors of local banks, which comes up for discussion in the national assembly this month.

A group of 21 lawmakers is promoting a revision to the Banking Act to require at least half a company's directors to have Korean citizenship and the remainder to have lived in Korea for a year prior to their appointment.

But Mr Han, in his first interview since being appointed, insisted Seoul was committed to opening up its markets.

"The Korean government now has no regulations restricting the number of directors on the basis of nationality and we will not enact a law or regulation to impose such restrictions," Mr Han said.

The FT understands the Finance Ministry plans to ask the lawmakers promoting the revision to drop the bill.

Nevertheless, South Korean authorities point out that Singapore and Canada have such nationality requirements, as do many states in the US, with some imposing conditions such as having to live within 100 miles of the bank.

Despite the current lack of legal requirement, the Financial Supervisory Service, Korea's financial regulator, which is currently reviewing Standard Chartered's application to take over Korea First Bank, has asked the London-based bank to ensure half its new board directors are Korean.

Foreign investors have also complained about regulations that came into effect last week requiring all owners of more than 5 per cent of Korean companies to declare plans to "influence" management. Those who do are now required to disclose main shareholders and source of investment capital to the FSS. Mr Han sought to clarify the investor concerns. "In this globalised world, it is not in our interests to be anti-foreign. We will closely monitor illegal practices on the part of foreign investors as well as domestic investors," he told the FT.

LOAD-DATE: April 3, 2005