by Park Soyeon
Published 10 Apr.2023 17:22(KST)
Seo Yu-seok, Chairman of the Korea Financial Investment Association, emphasized on the 10th that the issue of allowing payment and settlement services by non-bank sectors is different from the recent global banking crisis and that securities firms have sufficient capability to handle payment and settlement operations.
Regarding the full resumption of short selling, he stated that the two aspects of 'speculation' and 'hedging' (risk diversification) should be balanced, and assessed that the liquidity crunch risk related to real estate project financing (PF), which had unsettled the securities industry at the end of last year, has stabilized.
Chairman Seo made these remarks during a meeting with reporters at the Yeouido Financial Center press room on the occasion of his 100th day in office.
He mentioned that following the recent Silicon Valley Bank (SVB) incident in the U.S., which spread risks across the global banking sector, discussions to expand banks' payment and settlement services to non-bank sectors in Korea are at risk of being derailed, but securities firms have sufficient capacity to perform these tasks.
Seo said, "If securities firms take on payment and settlement duties, they will conduct remittances and transfers within the scope of deposited funds," and explained, "The payment and settlement by securities firms is a separate issue from the global banking sector risks."
He added, "Since SVB operated a specialized business model and encountered problems, the 'small license' issue may have some connection to the recent banking sector risks."
Although liquidity crunch issues related to real estate PF emerged mainly among small and medium-sized securities firms after last year's 'Legoland incident,' he analyzed that the situation has now largely stabilized.
Chairman Seo stated, "At the end of last year, the small and medium-sized securities firms' real estate PF asset-backed commercial paper (ABCP) purchase program and government support measures were activated, and through industry restructuring, the market is now smoothly achieving a soft landing," adding, "Interest rates are also trending downward and stabilizing, so ABCP continues to be absorbed in the market, and there is no need for major concern."
He also mentioned that there is a plan to extend the deadline of the program, in which large securities firms pooled funds to purchase ABCP from small and medium-sized securities firms to provide liquidity, from the end of next month to the end of December.
Regarding the full resumption of short selling, although he did not make a clear statement, he said, "Short selling has aspects of 'speculation' and also 'hedging,' but if only one side is emphasized, other beneficial functions may be weakened," and added, "I hope the system will be supplemented with a sense of balance."
He also spoke about 'token securities,' which have emerged as a new growth area in the securities industry. He conveyed, "Member firms basically want to handle both issuance and distribution of token securities together."
He continued, "The authorities have a clear logic that issuance and distribution should be separated due to concerns such as whether objectivity of token securities prices can be guaranteed when one company handles both issuance and distribution," and said, "It will not be easy for the time being."
He reiterated the need to revitalize the pension market, which he has consistently emphasized since taking office.
He said, "(Currently, combining pension savings and retirement pensions) one can contribute up to 18 million KRW annually, but we are proposing to 'double' this amount, allowing an additional 36 million KRW contribution and expanding the scope of income deduction," emphasizing, "It is better in the long term for more funds to flow into the pension market than now."
He also shared his outlook on promising overseas markets. Chairman Seo said, "India has a large population and a young average age in the 20s, making it a place where economies of scale are possible," and added, "In the case of Mirae Asset, it took 17 years, but now Korea is much better known, so domestic securities and asset management firms entering the market now can achieve results in a shorter time."
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