Chairman Hwang Young-key of the Korea Financial Investment Association (Kofia) said the association has requested to the National Assembly that it should take actions to expand the lending limits placed on the securities firms with large investment banking activities so they can give larger loans to big business firms.
At a discussion session on the role of the capital market in the supply of venture capital and the creation of jobs at the National Assembly Member Hall Sept. 21, the Kofia chairman said the bill to reform capital market laws to boost the cap for integrated financial investors on the supply of credit to corporations to 100 percent of their capital has been submitted for parliamentary approval. He urged that the bill must be approved to have venture capital supplied smoothly and boost the number of new jobs.
An integrated securities firm that has more than 3 trillion won in capital (with its capital being the limit for its corporate loans), will be limited to individual loans backed up by mortgages.
Banks are not subject to the credit limits and thus the need for eliminating the limits for the large securities firms. Therefor they can dispense as many loans as they want to corporations as part of their investment banking functions.
Hwang said the emergence of Internet banks on the banking landscape shows that large securities firms need their corporate loan limited removed in order to create a huge impact on the corporate financial market.
The banks are leery of providing loans to venture capital firms, and the securities firms should be allowed to fill the vacuum so that venture firms without sound financials can stay in business and sustain their projects, which are designed to develop key technologies and growth potential. That would be n impossible if securities firms don’t have the caps on their lending limits removed.
He took note of the example of Amazon.com, which had a tough time securing funds at first, but was able to start growing due to a $9 million infusion in venture funds. He said if it were not for that funding, the Amazon myth would not have been realized.
At the discussion session, various opinions were aired by the participants, but most of them favored the easing the financial regulations, especially, those on limiting the securities firms providing loans to the big corporations.
Professor Suh Eun-soon of Sangmyung University called for the deregulation of the NCR for the securities firms so that venture capital would be able to make bigger contributions to the development of high value-added industries.
Director Hwang Se-woon, in charge of the Capital Market of the Capital Market Research Institute, said entry regulations for the derivatives market must be eased while the extension of the non-taxable overseas securities funds sunset regulations should be allowed, along with the expansion of the securities firms to handle the foreign exchange transactions.
KOFIA ensures fair business practice among members, the fair trading of securities and investor protection, and developing the nation’s capital market and financial investment services industry.
KOFIA performs five major functions: self-regulation, market management, upgrading the financial investment industry, education and training of professionals, and fostering a sound investment culture. As a primary SRO, KOFIA oversees a wide spectrum of areas in the Korean financial investment industry. All securities, asset management and futures firms in Korea are KOFIA members and are subject to the KOFIA’s self-regulatory operations.
KOFIA is a non-profit, self-regulatory organization, founded under the Financial Investment Services and Capital Market Act. It was established on Feb. 4, 2009 through the merger of the Korea Securities Dealers Association, the Korea Futures Association, and the Asset Management Association.