Financial Services Commission Chairman's First Meeting with Securities Industry: "10 Years of Private Equity Firms, Yet Focused on Real Estate Finance"

29th Securities Industry CEO Meeting
Encouragement for Active Participation in Value-Up Program
Concerns Over Real Estate Finance Concentration... Revisions Planned for General Investment Trust Companies System

A meeting was held on the 29th at the Korea Financial Investment Association in Yeouido, Seoul, where Kim Byunghwan, Chairman of the Financial Services Commission, and CEOs of the securities industry gathered to discuss current issues such as corporate value enhancement and financial investment tax. Kim Byunghwan, Chairman of the Financial Services Commission, is delivering the opening remarks. Photo by Heo Younghan younghan@

On the 29th, Kim Byung-hwan, Chairman of the Financial Services Commission, met with CEOs of the securities industry and stated, "It is necessary to faithfully fulfill the fundamental role as financial companies providing comprehensive corporate finance (IB) services." He pointed out the reality that securities firms, which have expanded their scale through the comprehensive financial investment business operator system introduced 10 years ago, are focusing only on short-term high-profit businesses such as real estate project financing (PF) rather than supplying venture capital.

As part of the 'Financial Sector Relay Meeting' on the same day, Chairman Kim met with CEOs of 10 securities firms, including five domestic comprehensive financial investment business operators (Mirae Asset, Korea Investment, NH Investment, KB, Samsung Securities), and conveyed several requests.

First, Chairman Kim urged securities firms to actively participate in the government's 'Corporate Value-Up Program.' He said, "The government is actively promoting the advancement of the capital market and strengthening the competitiveness of our capital market and companies through corporate value-up as an important policy task. Since this is difficult to achieve by government efforts alone, the active role of the securities industry at the forefront of the capital market is necessary."

He also emphasized, "Even before taking office, I have stressed the urgent need to shift from a 'debt-centered' to a 'capital-centered' economy for the dynamism and sustainable growth of our economy. Given that the leverage ratios of households and companies are considerably higher than those of other countries, it is important for companies to increase funding through equity rather than debt, alongside appropriate management of household debt." This is a call for the activation of equity financing in securities firms, especially among all financial sectors.

He added, "During the Legoland incident, the market's trust in the securities industry was undermined due to the concentration on short-term profits in certain areas, leading to concerns about the spread of financial system risks. As financial companies that play a crucial role in our capital market and dynamic economic growth, the roles and operations of securities firms must also be improved." In recent years, concerns have grown in the market following the Legoland incident amid a sharp increase in contingent liabilities from real estate PF, mainly among some large and small-to-medium securities firms.

The Financial Services Commission plans to review the achievements and shortcomings of the comprehensive financial investment business operator system, introduced in 2013, on its 10th anniversary and reorganize it through discussions with the securities industry. Chairman Kim stated, "While the scale of securities firms has grown significantly, there are criticisms that venture capital supply to innovative small and venture companies is minimal and that there is a concentration in real estate finance. Securities firms need to reorganize to faithfully fulfill their fundamental roles."

He also urged securities firms to continue managing liquidity and soundness as they have done so far, requesting proactive and thorough risk management. The financial authorities will also work on system improvements to ensure that liquidity and soundness regulations appropriately reflect actual risk levels.

Chairman Kim emphasized the need for investor protection and a strict response under the 'zero tolerance' principle toward illegal and unfair issues. He asked securities firms to prepare without delay for the implementation of institutional improvements such as the establishment of a short-selling IT system. The Korea Exchange plans to develop the short-selling IT system by March next year, and cooperation from securities firms is essential in this process. Additionally, the authorities requested a re-examination of internal controls within securities firms.

The securities industry responded with a willingness to participate in the value-up program. They plan to provide related services such as supporting corporate funding and offering investment advisory during the corporate value-up process. In fact, some companies intend to participate in disclosing plans to enhance corporate value as listed companies. Furthermore, efforts to maintain financial stability will be made in parallel, such as proactively setting aside reserves to stabilize risks like real estate PF.

Seo Yoo-seok, Chairman of the Korea Financial Investment Association, acknowledged, "It is true that securities firms have recently been criticized for focusing on specific IB businesses," and noted, "Now is the time to diagnose the current status of IB businesses and readjust them to promote qualitative growth." He also requested institutional support from financial authorities to enhance the competitiveness of IB businesses.

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