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Securities firms to venture into short-term credit business

South Korea’s five largest securities firms in net worth are expected to submit applications to start short-term financing businesses Friday.

The firms -- Mirae Asset Daewoo, NH Investment & Securities, KB Securities, Samsung Securities and Korea Investment & Securities -- are planning to apply for eligibility reviews to start financing businesses from the third quarter of this year, according to the Financial Services Commission on Thursday.

The eligible securities firms will be granted permission within three months of screening, according to the FSC.

On Wednesday, Financial Supervisory Service Gov. Zhin Woong-seob reportedly encouraged securities firms to engage in the short-term borrowing business in a meeting with firms’ senior-level personnel.

(Herald DB)
(Herald DB)
The FSC unveiled on May 2 plans to nurture giant investment banks by revising the enforcement decrees of the Financial Investment Services and Capital Markets Act and their regulations on financial investment business.

The plans would allow financial institutions with net worth of over 4 trillion won ($3.46 billion) to issue, trade, broker and acquire promissory notes due to mature in one year. An eligible financial institution may issue promissory notes worth up to twice as much as the capital owned by the institution.

All five firms have net worth larger than 4 trillion won, as of March.

The three-month screening process includes two months by the financial authorities and one month by the prosecutors’ office, police and Fair Trade Commission.

The financial regulator has been accepting applications since May 12.

The revisions also allow an institution with net equity of over 8 trillion won to create investment management accounts, but none of the equity firms meet the criteria. Mirae Asset Daewoo has the largest net worth at 6.64 trillion won.

By Son Ji-hyoung (