South Korea’s financial regulator said Thursday it will submit a bill that would allow financial firms to invest in their non-profit affiliates, a move to loosen rules following a controversy over the banning of a local bank from funding its affiliated high school.

The Financial Services Commission unveiled the bill, which excludes financial firms’ non-profit entities from those banned from transferring assets within firms under the same ownership.

The bill is set for a 40-day public comment period before it is submitted to parliament for approval, the FSC said.

Under the envisioned bill, a financial holdings company or a bank is allowed to invest in their affiliated non-profit foundations so long as it comes as a social contribution. According to local law, they are forbidden to do so if the non-profit entity has been set up by the lender or its controlling shareholders.

The FSC’s decision came amid a growing call for easing the rule on banks’ public contribution. In October last year, Korea Exchange Bank, the newly acquired affiliate of No. 3 lender Hana Financial Group Inc., was banned by the regulator from funding 25 billion won for Hana Academy Seoul.

The FSC said it will keep closer tabs on banks’ investment in non-profit affiliates. A financial firm intending to make such an investment will need its board’s approval and to post the plan on its Web site, as well as reporting it to the regulatory body, the FSC added.

Currently, there are 17 non-profit entities affiliated with 12 local banks in Korea, with 23 set up by insurance companies and two others tied to two financial holding companies, according to FSC data. (Yonhap News)