KOSPI Listing Allowed with Market Cap Sole Requirement... Real Estate Loans by Securities Firms 'Restricted'

[Asia Economy Reporter Ji Yeon-jin] Going forward, comprehensive financial investment firms (jongtusa) will have real estate-related secured loans excluded from credit extension exceptions, and securities companies will be allowed to provide loans to venture companies. Similar to the KOSDAQ market, KOSPI listings will also be permitted for companies exceeding 1 trillion won based solely on market capitalization.

On the 29th of last month, the Financial Services Commission held a meeting of the Capital Market Subcommittee of the Financial Development Review Committee and announced on the 1st that it had discussed and finalized measures to revitalize corporate finance by securities companies.

Introduced in 2013, jongtusa is a system that allows large securities firms with over 3 trillion won in equity capital to engage in corporate lending. Currently, eight firms including Mirae Asset Daewoo, Samsung, NH, Korea Investment, KB, Shinhan, Hana, and Meritz have been designated. They can extend credit up to 200% of their equity capital for corporate loans, including direct loans to companies and corporate finance for small and medium enterprises. This opened the door for large securities firms with a certain level of capital strength to provide corporate loans like banks, as part of fostering investment banking (IB). As of June last year, corporate loans by jongtusa reached 14.3 trillion won, increasing 35.8 times compared to the first year of introduction.

However, criticism arose that jongtusa was not fulfilling its core investment banking role, with real estate-related corporate loans reaching 6 trillion won. In response, the government plans to exclude real estate-related credit extensions from the credit extension exception and apply additional exceptions for credit extensions closely related to corporate finance, such as loans to early-stage mid-sized companies, refinancing loans for mergers and acquisitions (M&A), and loans to companies improving their financial structure.

Additionally, venture loans will be allowed as a new business for securities companies, and regulations on the soundness of securities companies regarding innovative companies will be improved. The number of small and medium enterprise-specialized securities companies, currently designated as six, will be increased to eight to expand competition.

Efforts will also be made to promote initial public offerings (IPOs) of innovative companies. The market capitalization-only requirement, currently allowed only in the KOSDAQ market, will be newly established for KOSPI as well, and the market capitalization and equity capital requirements (market cap 600 billion won, equity capital 200 billion won) will be relaxed to a market cap of 500 billion won and equity capital of 150 billion won. IPO underwriters will be able to more accurately price stocks through demand forecasting and manage stock prices stably after listing.

Furthermore, a "(tentative) Institutional Investor New Share Allocation Guideline" will be prepared to allow institutional investors who contribute to price discovery to receive preferential treatment in new share allocations, and a "Cornerstone Investor" system will be introduced, where pre-designated institutional investors are given priority allocation of public offering shares to hold them long-term.

Kim Jeong-gak, Capital Market Policy Officer at the Financial Services Commission, said, "Once these measures are implemented, jongtusa can continue to grow as a total solution provider in corporate finance, including IPOs, M&A advisory, direct and indirect financing, and discovering innovative companies, while general securities firms can transform into specialized securities firms with expertise in specific fields and industries. From the corporate perspective, accessibility to direct finance will be elevated to a new level."

This content was produced with the assistance of AI translation services.