Business Groups Subject to Restrictions on Cross-Shareholding: Debt Guarantees Reach KRW 200 Billion, Up 325% Year on Year

Increase Driven by Daou Kiwoom's New Designation and LX's Exempt Guarantees
Voting Rights Exercised by Financial and Insurance Companies Nearly Double... Effect of Statistical Revision

The amount of debt guarantees among affiliates of business groups subject to restrictions on cross-shareholding rose 325% this year from last year, while the number of votes exercised by financial and insurance companies surged nearly twofold. The increases appear to be temporary, resulting from the designation of a new business group and more detailed statistical methods, among other factors.

On the 29th, the Fair Trade Commission (FTC) released its “2026 Report on Debt Guarantees by Business Groups Subject to Restrictions on Cross-Shareholding and Voting Rights Exercised by Financial and Insurance Companies.” This year, debt guarantees by business groups subject to restrictions on cross-shareholding totaled KRW 200 billion, a 325.5% increase from KRW 47 billion last year. Of this amount, KRW 60 billion in restricted debt guarantees was newly included after Daou Kiwoom Group was newly designated as a business group subject to restrictions on cross-shareholding; the guarantees had already been held by the group. In addition, debt guarantees exempt from restrictions, which are allowed for purposes such as fostering an export-import base, totaled KRW 140 billion, a significant increase despite a KRW 3 billion reduction due to KCC’s repayment of existing debt. The increase included KRW 96 billion in new guarantees from LX. The FTC said the total rose somewhat for temporary reasons, but viewed it positively that the long-term downward trend has continued since the debt guarantee restriction system was introduced in 1998 and that there have been no violations of the relevant laws.

Attempts to circumvent regulations using derivatives such as total return swaps (TRSs) are also subsiding. This year, the value of TRS transactions between affiliates remained at KRW 1.0567 trillion, unchanged from last year. Three business groups continued to engage in such transactions, with a total of nine transactions; no new agreements were signed, and only existing contracts were extended. No transactions between affiliates of business groups subject to restrictions on cross-shareholding were found in the areas of credit default swaps (CDSs) or credit-linked notes (CLNs). This is believed to be the result of companies preemptively refraining from new transactions of this kind, as the FTC began fully enforcing a notice specifying criteria for illegal conduct involving derivatives in April this year.

Financial and insurance companies belonging to large business groups exercised voting rights 399 times at the shareholders’ meetings of nonfinancial affiliates. In particular, the number of votes exercised under exceptions rose sharply, from 161 in 2024 to 312 this year. On the surface, this could appear to indicate an expansion in the abuse of control by financial companies, but the FTC said the change in the figures was due to a revision in its statistical methods. To reflect the recent trend of companies dividing shareholders’ meeting agenda items into more specific proposals in line with amendments to the Commercial Act and other changes, the FTC shifted from a method centered on broad categories to counting each detailed agenda item separately. For example, in the past, an entire proposal to amend the articles of incorporation—including the removal of a clause excluding cumulative voting and revisions to provisions on directors’ terms—was counted as one item. Starting this year, however, the proposal was divided into two items and counted separately, naturally increasing the number of votes recorded.

The FTC said, “We will continue to regularly monitor debt guarantees by business groups subject to restrictions on cross-shareholding and the exercise of voting rights by financial and insurance companies. We will also keep working to improve how information is provided, so that we can offer more timely information and ensure comprehensive market oversight.”

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