Chairman Yim Jong-yong of the Financial Services Commission (FSC) said the biggest talk of financial reform is the reform of the capital market this year. Without reform, he said, no development is ahead for the capital market.
Along with capital market reform, strategic finance and technology finance should also be renewed for the sake of firms with great potential growth, the FSC chairman said in his 40-minute long speech at the 10th Financial Strategic Forum hosted by a local economic daily on April 21.
The capital market should be reformed to support the growth of business firms as proposed in the Capital Market Reform Bill up for parliamentary consideration, which has yet to get the approval, although it was submitted to the National Assembly last year. The chairman said he was very sorry that the bill has not yet been approved.
The bill includes a plan to change the major players of the market, to spur market adaptation. A key ideal for the proposed reform will be to have more business firms hold initial public offerings to secure investment funds and separate the operation of the KOSPI and KODAQ securities markets, Yim said in the speech.
He said the Korea Exchange earned 56.9 billion won from the operation of the securities market last year, which surpassed the preceding year by a great margin. But the increased earnings were not much compared to stock markets abroad, including U.S. stock markets, which earned 2 trillion won, and Japanese stock markets, whose income amounted to 450 billion won last year, far surpassing the KRX. The ROE for KRX came to only 3 percent, far short of the 10 percent earned from stock markets abroad on average.
He also said Korea should have an investment bank like Goldman Sachs and he will push for the overhaul of the system for integrated financial investor firms to show the importance of reform for listing on the stock market and public subscribers.
The proposed reform should be made in such way as to pave the way for firms doing well to do better and firms with growth potential, including those with excellent technologies, to be able to secure funds easily in the stock market.
The chairman also said the securities firms that protect investors in stocks well should be given incentives to do better by allowing them a free hand to set the listing price for IPOs and determining the order of the IPOs, while those that did not do well should get stronger control over their operations.
Chairman Yim Jong-yong said he will focus on deregulating the strict financial rules in the country while he is at the helm of the Financial Services Commission, the watchdog of the financial industry in Korea. The emphasis will be on providing more loans to SMEs to expand their operations and grow, especially in their overseas operations.
The FSC chairman has been calling for reforms of Korea's financial industry, which heavily relies on traditional sources of income commission and interest from lending to investors.
Yim’s pledge on financial reform and the venture capital market was seen as part of broader efforts to support President Park Geun-hye's “creative economy” drive, which is designed to foster new economic growth engines beyond the nation's traditional manufacturing and heavy industries.
Yim identified four directions for financial reform that he will lead. First he will reform the financial authorities to the extent that an autonomous culture would be established. They should be like umpires in baseball games, not coaches. In order for them to officiate fairly and completely, Yim said he will change the inspection and disciplinary practices to the level of an advanced nation. Financial sanctions on individuals will be changed to organizational monetary sanctions, while non-official verbal instructions should be made in official statements.
“The old-fashioned financial system is behind South Korea's sluggish economy and volatile financial market. It is almost impossible to achieve an economic revival and structural reform without financial renovation," Yim said.
He asked the local financial community to step out of their comfort zone and rebuild the entire system from scratch in order to overcome the current challenges and keep up with the fast-changing global economy.
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