S. Korean firms seek to be financial giants

S. Korean firms seek to be financial giants

SEOUL (Reuter): South Korean companies are gearing up to take advantage of a government plan to create financial conglomerates.

Although details of the plan have yet to be unveiled, government officials say it is necessary to allow some conglomerates to specialize in the financial sector to beef up the competitiveness of the backward financial industry.

The idea, which President Kim Young-sam touched on in a five- year economic plan launched last July, is expected to be implemented after two or three years of public hearings and consultations with state and private institutions, they said.

Analysts say about 10 companies would vie to be leading financial conglomerates, or chaebol, through mergers and acquisitions.

These companies have already been active in buying other financial institutions, especially securities houses, and will seek to buy stakes in soon-to-be-privatized banks.

Daehan Kyoyuk Insurance Co Ltd, which bought a domestic securities house in November last year, said it planned to buy stakes in Citizens National Bank and Saehan Merchant Banking Corp, due to be privatized later this year.

"Daehan plans to take over two or three financial institutions to grow into the nation's largest specialized financial group," a company spokesman said.

Shinhan Bank, which has already branched out into the securities and insurance sectors, said it intended to grow into the leading financial giant.

"We are committed to the financial industry," said Kang Suk- jin, head of Shinhan's planning division.

Shinhan officers said their future strategy would depend on the government's plans, which are expected to be announced over the next two years.

"We are closely watching the government's moves on this issue and are ready to respond quickly," Kang said.

Other financial firms, including Korea First Bank, Korea Exchange Bank and the Korea Long-Term Credit Bank, have already made attempts to take over other financial companies and remain poised to expand the scope of their financial operations, analysts said.

Despite a current lack of details, government officials said a set of basic rules would be imposed when fostering the financial services giants.

A finance ministry official said non-finance-industry chaebol would not be allowed to muscle into the sector in order to prevent their economic concentration.

"The management of funds in the financial sector should be separated from that of industrial funds," he said.

"We must ensure efficient and fair distribution of funds between the two sectors and deter economic concentration."

An economic planning board official said monopolies by the financial chaebol must be minimized.