FSC to benchmark U.S. tolaunch another stock exchange


The financial authorities have moved again to establish a Korean version of Goldman Sachs and launch another stock exchange in the local securities market.

Though Korea had pushed ahead with the project to set up several big investment banks, the 2008 global financial crisis discouraged the nation from promoting mergers and acquisitions among big brokerage houses.

Under chief financial regulator Kim Seok-dong’s commitment, the Financial Services Commission reiterated Tuesday that it would ease a variety of regulations to realize the goal.

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 brokerage houses’ lending 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.

A big securities firm ― or an investment bank ― whose equity capital reaches 3 trillion won ($2.85 billion) will be entitled to extend loans to conglomerates, the FSC said in a statement.

“The nation’s big five securities firms saw their equity capital stay at about 2.7 trillion won on the average,” an FSC director general told a news conference.

Emphasizing that the five players’ average equity capital is equivalent to only 3.3 percent of that of Goldman Sachs, he predicted that the minimum requirement of 3 trillion won for lending business will accelerate M&As in the market.

He added that several major securities firms could also be able to meet the requirement through capital increase by issuing new stocks.

But the investment banks’ lending business will not be a full-scale one like that of commercial banks.

“Their lending will be authorized in certain sectors including consulting to corporate customers,” the official said.

Since the 2008 financial crisis involving woes in global investment banks in the U.S., skepticism has prevailed in the local market over policymakers’ former move to benchmark advanced capital markets.

With the reimplementation of the policy to promote bigger IB operations, the following issue will likely be minimizing risks from business expansion in the brokerage industry.

At the news conference, the FSC also said it has decided to break the monopolistic rights of the Korea Exchange.

The regulator has continued to push for launching an “alternative trading system,” which could compete with the main bourse Korea Exchange.

The system, adopted in the U.S. in 1998, is not regulated as an exchange in several advanced countries. But it is a venue for matching the buy and sell orders of its subscribers.

At least 30 percent of transactions are carried out through the system in the American stock market, according to FSC officials.

Should the alternative trading system be introduced, securities firms will be allowed to pick between the Korea Exchange and the ATS to buy and sell stocks on their own or at the request of their customers.

The FSC is set to propose the revised bill to a plenary session of the National Assembly in September.

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