Growth still high on Korean financiers` agenda

Korea`s financial players should gear up for tougher regulatory environments globally pertaining to leverage and capital soundness levels, as governments around the world move to curb high-risk activities of financial institutions, experts said yesterday.

But they emphasized that such a regulatory change should not hinder the financial sector from seeking growth and greater presence in the region,

Min Euoo-sung, CEO of Korea Development Bank and chairman of its parent KDB Holdings, said now is the time for local financial firms to tap into new markets, as their bigger and more sophisticated rivals are preoccupied with fixing their own problems.

"Korea`s domestic market is a Red Ocean, where competition is fierce and growth is limited," he said.

"Meanwhile, there are plenty of assets up for grabs in high-growth markets, with good pricing, and our competitors are in a situation where they can not pursue a deal aggressively," Min said in a forum in Seoul on Korea`s financial industry`s competitiveness.



Earlier this week, the state-controlled KDB said it was giving up a bid to buy Thailand`s Siam City Bank amid concerns, particularly on the part of regulators, that an overseas acquisition is too risky in the current financial environment.

John Walker, chairman of the Macquarie Group Korea, echoed Min`s view.

The Australian banking group conducted at least eight acquisitions since the Lehman Brothers` collapse and the consequent credit crisis. As a result, Macquarie has secured greater presence in the global financial field and pulled ahead many of its competitors, he said.

Park Jae-ha, vice president of Korea Institute of Finance, said the global regulatory tightening is unlikely to be a major risk factor for Korean banks.

"The global move to strengthen rules on banks is unlikely to have a major impact on Korean banks, as their management has been relatively sound."

"Korean banks will need to conduct more advanced liquidity risk management practices, but leverage regulations will not make a big impact on them," he added.

Korean banks are managing their equity-to-assets ratios, which indicate leverage levels, better than their peers in advanced financial markets, Park said.

Lee Jang-yung, vice chairman of the Financial Supervisory Service, urged local banks that they need to make preparations in advance for strengthened capital rules.

"Once stricter capital adequacy rules go into effect globally in 2012, banks across the world will go out to raise capital, making capital costlier to obtain," he said.

Under the theme of "the Future Vision for Korea`s Financial Industry: Takeoff in the Post-Crisis Era," yesterday`s forum focused on the global move to tighten banking regulations, as characterized by the U.S. plan to prohibit commercial banks from investing in hedge funds and private equity funds.

Sudhir Goel, managing director of JPMorgan Asia, said regulators should not add more risk to financial markets by making their policy directions too stiff.

"Korea has responded to the latest financial crisis pretty well. Thanks to that, the country now has the liberty to look more in the long term (when shaping the new financial order)," he said.

"Banks and regulators need to work together to figure out what to achieve."

Larry Klane, CEO of Korea Exchange Bank, said regulators should make their message as consistent and clear as possible, when talking about the future policy direction, in particular, with regard to whether it would follow global trends or to transform them into Korea-specific forms.

(milaya@heraldm.com)



By Lee Sun-young