Today I would like to talk about a financial holding company, especially about its governance structure. Before going into further detail, let’s talk about what holding company is in the first place. To be brief, a holding company is a firm which tries to overrule subsidiary companies by owning their stocks. When the overruled company is a financial organization, we especially call the holding company, a financial holding company.
A financial holding company was created in order to strengthen financial industry of Korea in fast changing financial environment. With establishment of a financial holding company, international financial competitiveness can be reinforced through systemization among financial companies, and supervision and management of financial flow becomes easier.
However, such a strong power structure of a financial holding company dominates not only subsidiary financial corporations like banks, but also the market. Currently, a financial holding company having too much power over their subsidiary companies is a serious problem in Korea. For instance, a financial holding company intervenes on subsidiary company’s personnel related matter and investment which leads to conflicts between presidents of financial holding companies and banks.
This is the moment when our hero, Financial Services Commission (FSC) appears. J FSC is now considering few possible measures to settle the problem.
1. Restricting a financial holding company’s function to providing only information about financial management environment
2. Building up Fire Wall between a financial holding company and subsidiary companies in order to prevent presidents of a financial holding company from stepping in personnel matters and budget of subsidiary companies
3. Banning a financial holding company’s executives holding more than one office at subsidiary companies
Few other possible solutions are being carefully measured and still on debate. Next month, FSC is expecting to organize a taskforce team to come up with more concrete and effective solutions. This would be the first step to achieve the main purpose of a financial holding company and strengthen Korea economy.
By Soon-Hyang Yoon (email@example.com)