|Kakao Chairman Kim Beom-su|
Kakao, operator of the nation's most widely used messenger app KakaoTalk, has been allowed to become the largest shareholder of its internet-only bank subsidiary Kakao Bank.
The Financial Services Commission (FSC) said Wednesday it approved Kakao's application that the messenger app operator had submitted to the financial regulator on April 3 to become the bank's largest shareholder with a 34 percent stake.
Kakao filed the application as lawmakers last year eased related internet-only bank laws prohibiting non-financial firms from owning more than a 10 percent stake in a financial firm. After the revision, non-financial entities have been able to become major shareholders in internet banks, owning stakes up to 34 percent.
Since then, Kakao has sought to increase its shares of Kakao Bank, as a larger share enables the company to inject more funds into the bank and scale up its business.
On July 12, it said in its regulatory filing that it decided to acquire 41.6 million shares worth 208 billion won ($176 million) from Korea Investment Holdings to hold a 34 percent stake in the internet bank.
Kakao has been Kakao Bank's second-largest shareholder having a 10 percent voting share, while Korea Investment Holdings is the major shareholder holding a 50 percent stake.
With the FSC's approval, Kakao will be the largest shareholder, while Korea Investment Holdings will become the second-largest.
"We would appreciate the National Assembly and the government taking preemptive measures against the changing global finance industry," Kakao co-CEO Yeo Min-soo and Joh Su-yong said in a press release. "We will boost our partnership with Kakao Bank and investments in it, so that Kakao Bank continues its innovation."
Even before the FSC's announcement, market observers expected Kakao would be the largest shareholder of Kakao Bank as a government decision in June cleared away some legal hurdles.
Kakao's plan faced an unexpected temporary snag as the firm's Chairman Kim Beom-su was summarily indicted for neglecting a disclosure obligation regarding Kakao's five affiliate companies.
Under the eased laws regarding internet-only banks, major non-financial shareholders seeking to own more than a 10 percent stake in an internet-only bank should not have been subject to punishment heavier than a monetary penalty for violating the fair trade act, tax or special economic law over the past five years.
Although Kim was found not guilty in the first trial, the prosecution appealed to a higher court against the decision.
The FSC therefore asked the Ministry of Government Legislation whether Kakao is eligible to raise its stake in Kakao Bank considering Kim's legal battle.
On June 24, the ministry ruled that Kakao is eligible to become the largest shareholder of its internet-only bank regardless of Kim's actions, saying, "Kim is not subject to related laws regarding internet-only banks."
"As the legislation ministry said, we reached the conclusion that Kakao did not violate the fair trade act," an FSC official said.