"Securities Firms' Overseas Subsidiary Loan Regulations Eased with Same Standards as Domestic Headquarters"

Financial Services Commission Official Mentions
'Introduction of Cornerstone to Encourage Long-Term Investment in IPOs'
'2nd Financial Investment Industry Global Competitiveness Enhancement Seminar'..."Enhancing Global Competitiveness"

The financial authorities will rationalize the regulation on the calculation of the Net Capital Ratio (NCR) for overseas subsidiaries of securities firms to strengthen the global competitiveness of the financial investment industry. Additionally, to enhance the stability of the initial public offering (IPO) market and promote long-term investment, they have decided to promptly introduce the 'Cornerstone Investor' system.

On the 17th, the Financial Services Commission announced this policy at the '2nd Relay Seminar for Strengthening the Global Competitiveness of Financial Investment Industry' held at the Korea Exchange in Yeouido, Seoul. Lee Yoon-soo, Director of the Capital Market Bureau at the Financial Services Commission, explained during the panel discussion, "When calculating the NCR, comprehensive financial investment business operators (Comprehensive Securities Firms, securities firms with over 3 trillion KRW in equity capital) apply differentiated risk weights (1.6% to 32%) based on the credit rating of the counterparty for credit extensions. However, when overseas subsidiaries of comprehensive securities firms extend corporate credit, a uniform risk weight (100%) is applied, which restricts the global business of overseas subsidiaries." He added, "We plan to apply the same risk weights to overseas subsidiaries extending corporate credit as their parent comprehensive securities firms through future regulatory amendments."

Furthermore, the Financial Services Commission decided to introduce the Cornerstone Investor system to enhance the safety of the IPO market. This system involves institutional investors committing to purchase a portion of the IPO shares without knowing the public offering price beforehand. It is expected to increase the reliability of the offering price and encourage long-term investment in IPO shares. Regarding this, Director Lee stated, "We will prepare so that legislative discussions can begin promptly in the National Assembly."

Participants at the seminar emphasized the need for strategic approaches such as a phased entry of 'first asset managers, then securities firms' to activate overseas expansion of the financial investment industry, as well as joint entry with domestic industries and pension funds. Choi Hee-nam, invited research fellow at the Korea Capital Market Institute and keynote speaker, explained that when pension funds invest overseas, domestic asset managers should be encouraged to act as delegated managers (GPs), and that customized financial services from large domestic securities firms are necessary for large corporations' overseas investments.

Son Byung-doo, Chairman of the Korea Exchange, said in his congratulatory remarks, "For the financial asset industry to grow to the next level, expansion into overseas markets is necessary," and added, "I hope the successful strategies shared through this seminar will become the driving force for Korea's capital market to make a global quantum leap beyond the Korea discount."

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