FSC to ease regulations on local investment firms' overseas business

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 08:48

Markets

FSC to ease regulations on local investment firms' overseas business

Posted : 2023-04-17 16:45

Updated : 2023-04-18 14:41

The headquarters of the Financial Services Commission (FSC) in central Seoul / Courtesy of FSC

Active M&A and 'glocalization' strategies advised for overseas business

By Anna J. Park

Financial authorities will seek to ease regulations imposed on overseas subsidiaries of local financial companies, in a move to strengthen local investment firms' global competitiveness and outbound business growth.

Korea's top financial regulator also plans to introduce a cornerstone investor system into the country's public offering process, which allows investors to be brought into a forthcoming IPO before a formal book-building process starts.

During Monday's seminar hosted by the Korea Financial Investment Association (KOFIA) and the Korea Capital Market Institute (KCMI) on the theme of strengthening the global competitiveness of local investment firms, Rhee Yun-su, director general of the capital market bureau at the Financial Services Commission (FSC), said the top financial regulator aims to reflect requests of local financial firms to aid their advancement into overseas markets.

Mirae Asset Securities President Kim Mi-seob speaks during a seminar co-hosted by the Korea Financial Investment Association (KOFIA) and the Korea Capital Market Institute (KCMI) held at the Korea Exchange (KRX), Monday. Korea Times photo by Anna J. Park

"The FSC will apply eased rules of net capital ratio (NCR) ― a percentage of net operating capital to gross risks ― on local investment firms' corporate credit offering for their overseas subsidiaries," Rhee said during the seminar, adding that the current rules of NCR calculation tend to limit local investment firms' global business activities.

The official also said the FSC will prepare for revising legislation to introduce the cornerstone investor system into the country's capital market, in order to secure the local IPO market's stability, as urged by private equity firms.

FSC's director general of the capital market bureau also highlighted that the financial authorities will continue to take proactive measures to facilitate global investors' access to local markets as well as local financial firms' forays into overseas markets.

Sohn Byung-doo, Korea Exchange (KRX) CEO, speaks during an investment information session held in New York, U.S., on April 13. Courtesy of KRX

Sohn Byung-doo, CEO of KRX, the country's market bourse operator, said local investment firms need to scale up their investment banking units to compete with other major global investment banks (IB) in overseas markets, while financial authorities should overhaul regulations that burden local financial firms' outbound business efforts.

"Financial authorities need to boldly abolish unreasonable regulations that stem financial firms' overseas advancement," Sohn said during the seminar.

Park Tae-hyun, partner at MBK Partners, and a participant at the seminar, called on the financial authorities to take measures to further activate IPO markets. He also urged the regulator to streamline taxation rules so that foreign investors can have easier access to investments in local capital markets.

According to KCMI's fellow Choi Hee-nam, Korea's investment firms' capital size has more than doubled during the past decade, but they still lack in terms of global advancement. On average, Korea's investment companies earn only 4.3 percent of their entire revenues from overseas markets, which is a huge contrast to other major global IB firms.

UBS earns 78 percent of its entire revenue from overseas markets, while JPMorgan, Morgan Stanley and Goldman Sachs make 46 percent, 44 percent and 40 percent, respectively, from overseas markets.

annajpark@koreatimes.co.kr