Secure Lending
On Oct. 14, the Financial Services Commission unveiled a plan for assisting in the business of securities firms in the field of corporate financing.
According to the plan, the credit limit applied to a financial investment business with an equity capital of more than 3 trillion won (US$2.65 billion) is extended to 100 percent of its equity capital in that field, while its payment guarantee limit is separated from the credit limit for a significant extension. The plan is expected to be applied to five securities firms meeting the equity capital requirement – NH Investment & Securities, KDB Daewoo Securities, Samsung Securities, Korea Investment & Securities, and Hyundai Securities.
At present, the combined credit line covering credit offering for enterprises, credit loans, and entrusted securities-back loans cannot exceed 100 percent of equity capital. An amendment of the Financial Investment Services and Capital Markets Act that includes the above-mentioned measure for the extension is currently pending in the National Assembly and is expected to be passed late this year or next year. According to the amendment, the five companies are to be subject to much-relaxed regulations when it comes to credit granting with a maturity of one year or less, which will improve mid to long-term lending conditions.
At the same time, some of the other, smaller securities firms are predicted to be designated as those specialized in corporate financing for small and medium enterprises (SMEs) so that financing for SMEs and venture firms can be facilitated. A public-private committee is to select such securities firms based on the criteria, including investment banking, advisory service records, and staff organization, before the selected firms are provided with funds and business opportunities via the Korea Credit Guarantee Fund, the Korea Technology Finance Corporation, and the Growth Ladder Fund.
The commission said that Korea Asset Investment Securities and IBK Investment & Securities are interested in this scheme right now. It is scheduled to be put into effect in the first quarter of 2016.