President Park Jae-shik of Korea Securities Finance Corp. (KSFC) announced on March 12 the launch of an online loan service called the E-share Loan, a small mortgage loan facility exclusively for individual borrowers, at a media briefing on the occasion of his 100th day in office.
The small loan is given against the pledge of shares and other securities as mortgage (from 50 to 60 percent of market value) at an annual interest rate of 5 percent, he said.
He said the interest rate they charge for the small loans under the e-share loan facility is in line with the practices of other financial institutions in providing loans against stock as collateral.
The CEO said loans have been provided against securities as mortgage before, but the loan facility on the internet is the first one launched in the financial industry in Korea. Customers don’t have to visit the offices and can file applications and documents online at the homepage (ebank.ksfc.co.kr). The interest rate is lower compared to rival financial institutions by about one percent, Park said. What the customers have to do is register their names on the applications for internet banking and deposit their securities in their accounts at the KSFC homepage. For those who already have an account, they only need to ask the KSFC to transfer their shares to their accounts.
Park said the company’s purpose of providing small loans to individual borrowers under the online facility is to speed up the services so that they can get the loans as quickly as they can.
Park also said KSFC will take measures to encourage the company employees to own shares of their companies, especially those of SMEs, adding that SMEs have not been getting the same favors that the large companies have been getting for their employees to hold their company’s shares, as it is often difficult to evaluate their market values since so many of them are unlisted. “We will manage the company to provide support to those SMEs so that healthy ones will be able to secure funds so that their employees can own shares,” he said.
He also said many securities firms expect to face tough times due to low economic growth and low interest rates and KSFC will make efforts for mutual survival. “We will continue to expand the funds for small securities firms this year,” Park said.
Since taking over the management of KSFC, Park has been able to cut interest rates on funds loaned to small securities firms by from 44 to 48 basis points and provided 50 percent of profit from mortgage securities given to securities firms to securities firms themselves, he said. At the same time, KSFC has increased the note discounts and repurchase agreement purchases to expand its funds given in support of the securities firms, in addition to 1 trillion won the company set up in funds to be provided to small and medium-sized securities firms.
KSFC will also set out to expand its business territory and launch a professional bond dealer (IDB) as soon as it obtains the license this year. IDB deals with professional bond investors by mediating the bonds to them so that they can buy them on a competitive basis outside the bond market.
Park said he will merge two branches of the company’s seven branches around the country this year to cut expenses and pay annual salaries based on performance results as part of the reform plan he has in mind.
He said the company has been considering an idea to set up a public-interest firm to support academic research on finance, social contributions, financial education and to provide scholarships to children of economically distressed families.