After the ability to transfer retirement pension products in their entirety to other financial institutions became possible, a large amount of funds exited the banking sector, prompting some major commercial banks to request regulatory improvements regarding exchange-traded funds (ETFs) from financial authorities. These banks also requested to be allowed to conduct ETF transactions in real-time like securities firms. They emphasized that they would also build related systems.
However, financial authorities stated that allowing banks to conduct real-time transactions of retirement pension ETFs is impossible, given the current regulations and industry restrictions.
According to the Financial Supervisory Service on the 9th, some large banks with investment capacity recently inquired about regulatory improvements, saying they have established a real-time ETF trading system. After setting up the real-time trading system, they requested permission from financial authorities to conduct ETF transactions in real-time like securities firms.
The banks' call for real-time trading of retirement pension ETFs is due to the significant transfer of bank retirement pensions to securities firms since the service for the physical transfer of retirement pensions began at the end of last year. According to the Ministry of Employment and Labor and the Financial Supervisory Service, from October last year when the service was implemented to January of this year, the amount transferred from banks to securities firms reached 648.1 billion won.
By industry, 405.1 billion won flowed into securities firms, while 461.1 billion won exited banks. Considering that the total size of retirement pensions in Korea amounts to 430 trillion won, the scale of fund movement is not large; however, forecasts suggest that outflows of funds from bank-joined retirement pensions will intensify in the future.
The banking sector has established itself as a traditional stronghold since the introduction of the retirement pension system in the mid-2000s, but circumstances have changed. Securities firms are increasing their market share, fueled by a surge in U.S. stock investments and the tax deferral advantages of overseas ETFs (domestically listed) under retirement pensions.
An official from the FSS noted, "Since the introduction of the physical transfer service, the trend of retirement pension funds moving to securities firms has become evident," adding that "while defined benefit (DB) and defined contribution (DC) plans, where corporations save workers' retirement funds, are holding up well, the strength of securities firms is pronounced in individual retirement pensions (IRP)."
Banks have only about 150 ETF products available for retirement pension subscriptions. In contrast, securities firms can freely choose from 700 to 800 products, excluding leveraged and inverse products that cannot be subscribed to under retirement pensions.
An even greater advantage is real-time trading. In contrast, banks lack a real-time trading system for ETFs, resulting in aggregate trading of orders placed by subscribers being conducted the next day. Individuals who have subscribed to retirement pensions at banks cannot buy and sell ETFs at their desired prices and times. The banking sector argues that such regulations inhibit fair competition.
However, financial authorities maintain their position that they cannot allow banks to conduct real-time transactions of retirement pension ETFs. An official from the FSS said, "This time, banks requested that they be equipped with necessary systems," but added, "The industry regulations remain valid."
Earlier, in 2021, the banking sector submitted a non-action letter to the Financial Services Commission requesting permission for real-time ETF trading. At that time, the Financial Services Commission also issued a denial.