Korea has a highly developed and profitable financial services sector including the second largest insurance market and third largest banking market in Asia.
Financial Sector in Korea
South Korea is the fourth largest economy in Asia and 12th in the world. It has a population of
50 million and a GDP growth forecast in 2012 is 1.9-3.8% per cent. It is one of the G-20 major
economies and a member of OECD. With EU-Korea FTA taking effect from 1 July 2011, the
market has become more attractive to foreign investors.
Korea has a highly developed and profitable financial services sector including the second
largest insurance market and third largest banking market in Asia.
According to a recent data, Korea’s competitiveness as a global financial centre has improved
dramatically to become the 11th competitive centre in the world. Investment from international
financial services groups is increasing, reflecting the economic potential and strengthening
balance sheets of Korea’s financial institutions.
The stability of the banking sector is underpinned by strong fundamentals and active regulation.
At less than 1%, South Korea’s non-performing loan ratio is low by regional standards. Foreign
investors own some 70% of banking sector.
The asset management sector is set for rapid growth as a result of pension reform. More than a
third of the country’s 52 asset managers are now solely or jointly run by international groups.
Insurance remains dominated by a small number of local players. However, foreign companies
have made strong inroads. Foreign entry in to the market has included both acquisition of
existing companies and Greenfield start-ups. Current flotation could open up new investment
The relaxation of controls on cross-ownership of financial services will further open up
opportunities for market entry, acquisition and business development. As international financial
services groups look to develop their footprint in Asia, a presence in Korea is becoming
desirable, if not essential.
Financial Investment Services and Capital Market Act (FSCMA)
The FSCMA came into force in February 2009. The new law was meant to reshape the landscape
of the industry by breaking down regulatory barriers separating stock brokerages, futures trading
and asset management, thus encouraging market consolidation to form large, internationally
competitive players. The Act is comparable to the UK’s ‘Big Bang’ or the repeal of the Glass-
Steagall Act in the US. A key aim is to enable larger securities companies to provide a broader
and more sophisticated range of capital market products and fee-generating services. The Act
also encourages greater cross-selling and cross-ownership within the sector. The Act has been
recently revised to aim at introducing home-grown hedge funds to Korea’s capital markets.
Hana Financial Group’s acquisition of Korea Exchange Bank will turn the former into a major
force in the domestic market, but a fiercer competition within the sector could put a ceiling on
south Korean banks’ profitability. Following Hana’s expansionary move, there will be four
strong banking groups (Shinhan, KB Kookmin, Woori & Hana) with similar asset sizes,
suggesting that the highly-saturated sector could see competition intensify further.
Long-term strategic investors have moved into the market in recent years, in many cases
acquiring the stakes of an earlier wave of private equity buyers. The FSCMA could open up new
opportunities for cross-selling to bank customers, including further development of
Bancassurance and capital market business.
The market size is still small compared with the size of other developed economies. The value of
managed assets was US$274.8 billion as of end of September 2011, ranking 15th among 46
The asset management sector is set for rapid growth as a result of pension reform. South Korea’s
retirement pension fund has been growing at more than 100% per year, while the private pension
fund has been expanding at an average of 15% per year.
Foreign entry into the market has included both company acquisition and greenfield start-ups.
Recent listings of life insurers may create new investment targets. Despite the global economic
slowdown, annual insurance premium maintained a high growth trend in 2011 due to changes in
the financial environment as well as diversifying consumer needs. The on-going demand for
after-retirement protection-type products as well as health insurance products, including accident
and illness, and medical expense coverage products are expected to drive this growth. In life
insurance sector, sales of both annuities and savings insurance products are in high demand
among consumers. Non-life insurance premiums growth was mainly driven by growing demand
for long term insurance and automobile insurance. Samsung Life, Korea Life and Kyobo Life
dominate the South Korean life insurance market, accounting for more than half of all life-
insurance premiums whereas Samsung Fire and Marine is the largest non-life insurer. Moreover,
adoption of IFRS (International Financial Reporting Standards) in 2011 and introduction of risk
based capital system (RBC) has contributed to strengthen risk management and improve
financial prudence of insurers. It is expected that South Korean insurance sector will grow in
coming years on account of more demand for retirement pension scheme, health insurance
policies and introduction of new products/policies with more benefits as well as protection.
Sovereign Wealth Funds/Pension Funds
Particular opportunities for asset management and property management companies are to work
alongside the likes of the National Pension Service (‘NPS’). Their fund is the fourth largest
pension fund in the world with assets of $300 billion. They will have to outsource their
increasing assets to more financial service companies, pushing up the demand for funds. They
are already working with some UK asset and real estate management companies and purchased
three iconic buildings in London in 2009 including HSBC HQ in Canary Wharf and 88 Wood
Street in the City of London.
The Korea Investment Corporation – a sovereign wealth fund – has shown an interest in real
estate and other alternative products in UK. They opened an office in London on 1 December
2011 and recently acquired an office building in the City of London.
Other pension funds such as the Teachers’ Pension Fund and the Korea Post are also interested in
working with UK companies.
The European Union and Korea signed the Free Trade Agreement (FTA) on 6 October 2010
resulting in the removal of 97 per cent of all tariffs cutting €1.6bn of duties annually for EU
exporters from July 2011.
Financial firms will gain substantially from the FTA. They will be able to freely transfer data
from their Korean branches and affiliates to their headquarters overseas.
FTA commitments will also enable for financial firms to be off-shoring of back office functions
which could impose additional costs of £10-20 million for such firms setting-up operations
Latest export opportunities – Financial & Professional Services
Latest export opportunities – Korea (South)
Getting into the market
To compete in South Korea UK companies are recommended to have a capable local partner
who has an established network in the market and extensive market knowledge.
A long-term perspective and a reliable partnership between supplier and their local partner is one
of the key factors in achieving success.
More about doing business in Korea (South)
Market intelligence is critical when doing business overseas, and UKTI can provide bespoke
market research and support during overseas visits though our chargeable Overseas Market
Introduction Service (OMIS).
To commission research or for general advice about the market, get in touch with our specialists
in country - or contact your local international trade team.
ξ Jiwon Hahn, British Embassy Seoul. Tel: +82 (0)2 3210 5603 or email:
Contact your local international trade team
City Week 2012
Contact: Maurice Button
City & Financial
Tel.: +44 (0)1483 746000
UKTI runs a range of events for exporters, including seminars in the UK, trade missions to
overseas markets and support for attendance at overseas trade shows.
Latest events – Financial & Professional Services
Latest events – Korea (South)
More about OMIS and other UKTI services for exporters