The Korean financial authority started to accelerate restructuring of the local securities industry, including measures to promote mergers and acquisitions (M&A) of small and mid-size brokerage houses that suffer from poor management.
According to financial industry sources on November 24, the Financial Supervisory Commission (FSC) will come up with a comprehensive measure to restructure the securities industry within this year including the promotion of M&As of small and mid-size brokerage houses and shift them to specialized brokerage houses such as asset management or corporate financing.
An official of the FSC said, “The government and the financial industry sympathize with the situation that the number (62) of brokerage houses are too many for the local market size and their businesses are not differentiated,” adding, “The government is moving ahead with a plan to give some incentives to promote autonomous M&As.
The official said, “The government is considering various measures, but it would be difficult for them to include tax incentives.” Many financial industry sources expect that the streamlined licensing procedure and tax incentives for the newly set up securities through the M&A may be included in the government’s coming measures.
As part of the efforts to prop up the sluggish stock market, the FSC announced measures to reinvigorate local brokerage businesses in May and designated five big securities firms as investment banks (IB) in October.
Despite such desperate efforts by the government, the local stock market has been bearish due to the prolonged economic downturn at home and abroad.
According to financial industry sources, 10 brokerage houses, including I'M Investment & Securities, Golden Bridge Investment & Securities, and Tongyang Securities, have been put up for sale in the local M&A market, but no deal has been made until now.
In addition, the sale of Woori Investment & Securities has been ongoing in compliance with the privatization of Woori Financial Group by the government, and KDB Daewoo Securities will also be on the M&A market in the future.