The government plans to allow local commercial banks to take over financial groups in foreign countries to boost their global competitiveness in the face of the saturated domestic market.

The state-led project for encouraging the active expansion of domestic banks into foreign markets has been included in the policy agenda for development of the financial industry, unveiled by the Financial Services Commission on Wednesday.

The authorities have decided to lift a ban on the acquisition by domestic banks of financial holding firms (which hold a group of business units) in the overseas market, the FSC said in a statement.

Under the state policy, local lenders are expected to actively tap the merger and acquisition markets abroad. This means a first-tier Korean bank could take over several units of a foreign financial group, including banking, securities and insurance, in one batch.

Further, the authorities promised to allow local major financial groups such as Woori, KB, Shinhan and Hana to more vigorously set up overseas subsidiaries or units.

The FSC plans to ease the current supervisory rule in which Korean financial groups must hold more than a 50 percent stake in their overseas operations.

Overseas branches of Korean banks are also allowed to expand the scope of their businesses. While their businesses had been restricted to the territory endorsed by Korean regulators, they will now be able to carry out more businesses like investment brokerages, as long as foreign regulators approve the expansion.

“Financial firms had to bear the dual burden of meeting the requirements imposed by the regulators at home and abroad. We will allow their business proposals to go through, even if those go somewhat against the domestic laws and regulations,” FSC chairman Shin Je-yoon said at a news briefing.

The chief supervisory official said a more urgent task is for financial firms to elevate their competitiveness voluntarily, reiterating that the development vision cannot be attained through the government policies alone.

For the stock brokerage industry, the FSC plans to vitalize the M&As among Korean securities firms.

The financial authorities have moved again to establish several big investment banks by inducing active mergers.

The financial regulator said it would revise laws on the capital market and financial investment business to allow bigger securities firms to issue loans to conglomerates.

The policy to endorse lending by brokerage houses could be regarded as epoch-making in terms of inducing M&As among major players such as Daewoo Securities, Samsung Securities and Woori Investment & Securities.

By Kim Yon-se (kys@heraldcorp.com)