Dimension Similar to Nomura
Mirae Asset Daewoo Co., South Korea's biggest brokerage, announced that it will increase its equity capital to 8 trillion won (US$7.37 billion) by issuing new stocks, though the government recently decided to suspend the screening on the company’s permission to issue promissory notes, which is the deposit function of mega-sized investment banks (IBs). In terms of size alone, it is similar with Nomura Securities Co., which is considered one of leading IBs in Asia. Choi Hyun-man, executive vice chairman of Mirae Asset Daewoo, said, “The company will expand its capital to 8 trillion won (US$7.37 billion) as the first step to become the Korean version of Goldman Sachs.”
“The recent rumor that Mirae Asset Daewoo has carried out a paid-in capital increase to run an investment management account (IMA), which is only permitted to brokerages with capital of 8 trillion won (US$7.37 billion), because the screening on the approval of the issuance of promissory notes for brokerages with capital of 4 trillion won (US$3.68 billion) has been put on hold is a mere speculation. It would be great to receive approval but Mirae Asset will pursue the original goal even it fails to receive permission,” said Choi on December 18. He stressed that the company will strengthen the global competitiveness by expanding its capital, saying, “We have made a global investment from 2002 before anyone else and are better at venture capital investment than anyone else.”
In regard to the delay of the paid-in capital increase for Mirae Asset Capital, which was initially scheduled at the end of the year, Choi said, “There is no need to increase capital by issuing new stocks because the company’s assets have greatly grown from six months ago as it focused on its main businesses such as financing related to automobiles and new technologies. Unlike other capital affiliates of conglomerates, Mirae Asset Capital has never caused problems including the incomplete sales of corporate bills of affiliates.”
Mirae Asset Capital is a de facto holding company of the group. It holds a 18.24 percent stake in Mirae Asset Daewoo, a 16.6 percent stake in Mirae Asset Life Insurance, a 71.91 percent stake in Real Estate 114. The book value of the combined stakes account for 140 percent of 2.1 trillion won (US$1.93 billion) of Mirae Asset Capital’s equity capital. According to the Specialized Credit Financial Business Act, credit financial companies, like Mirae Asset Capital, should not have more than 150 percent of the ratio of affiliate investment and equity capital as of the end of a year.
In addition, Mirae Asset Capital needs to convert to a holding company when its stake value of subsidiaries surpasses 50 percent of the total assets and it is the largest shareholder according to the Financial Holding Companies Act.
In the past, Mirae Asset Capital got around the restrictions by raising debts to increase its total assets at the end of every year. Recently, the company is seeking to end controversy by expanding its main business. However, the controversy over the governance structure will continue as the civil society points out that it is not a fundamental solution and members of the National Assembly are discussing to tighten related regulations and revise the law.