By Han Woo-ram and Choi Mira
South Korea’s financial authority will approve Monday candidates among local brokerage houses to branch out to investment banking activities.
The Financial Services Commission (FSC) said Monday that it will issue additional permits among the candidates - Mirae Asset Daewoo Securities Co., Samsung Securities Co., Korea Investment & Securities Co., NH Investment & Securities Co. and KB Securities Co. - that meet the eligibility as full-fledged investment banks.
Korea Investment & Securities that already gained the new status will be licensed to issue and sell registered promissory notes to retail investors. Unlike unsecured commercial papers, notes issued by newly licensed investment banks receive the same depositary coverage as bank deposits. The short-term and secured debt instrument could be highly appealing to consumers who do not have many investment options amid low-interest environment.
The government offered to allow issuance of secured notes to non-bank institutions with net worth of at least 4 trillion won ($3.6 billion).
That spurred a race in the industry to become bigger. Mirae Asset bought KDB Daewoo Securities in March last year, NH took over Woori Investment & Securities in 2015 and KB acquired Hyundai Securities in December 2016. Korea Investment paid out almost 1 trillion won worth interim dividends to its holding entity Korea Investment Holdings last year to enhance the holding company’s financing capability for its subsidiaries. Samsung Securities raised its equity capital through share buyback and rights offering.
In the initial stage, the five will be able to engage in foreign exchange business. After further review, they can win license to sell notes. Meritz Securities Co. that bumped up equity capital to 3.2 trillion won and Shinhan Investment Corp. to 3.1 trillion won are next in line to join the investment bank category.