April 20, 2024

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[THE INVESTOR] Korea Investment & Securities is set to become the first investment bank in Korea having received a key license for short-term financing from the financial regulator on Nov. 13.

The Financial Services Commission has designated five brokerages with 4 trillion won (US$3.57 billion) or more equity capital as investment banks that can now expand the business scope of eligible securities companies. The others include Mirae Asset Daewoo Securities, NH Investment & Securities, KB Securities and Samsung Securities. 

However, the license for short-term corporate lending such as the issuance of commercial papers, considered as the key business for an investment bank, was awarded only to financial and merchant banking service provider KIS.

“A short-term corporate lending license was given to KIS after a regulatory review,” the FSC statement noted.

The financial regulator said that it is reviewing applications from three other brokerages without giving a specific timeline, noting that it has stopped the screening process for Samsung Securities due to an ongoing lawsuit against the largest shareholder of the company Lee Jae-yong.

The Samsung heir is in jail for a bribery case involving former President Park Geun-hye.

“I feel responsible as head of the country’s first company (to become an IB),” KIS CEO Yoo Sang-ho told reporters.

“Mega IBs will compete for good investment opportunities rather than raising funds and our company will induce growth by helping companies that have difficulties in fundraising.”

Analysts said that KIS has a head start to become a mega-sized IB. “KIS is expected to start its short-term corporate lending business as early as next week while the other four brokerages await approval,” Park Hye-jin, an analyst at Kyobo Securities wrote in a research paper on Nov. 14.

Korea has been pushing to foster homegrown, mega-sized IBs modeled after global investment banks such as Goldman Sachs. It decided to revise legislation this year to allow them to expand their businesses beyond brokerage services

Last year, the financial regulator announced that IBs with 4 trillion won or more in equity capital will be eligible for short-term corporate lending.

Brokerages with equity capital of 8 trillion won or more will also be able to launch investment management accounts.

By Park Ga-young (gypark@heraldcorp.com)