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KB moves step closer to issuing promissory notes

May 10,2019
A commission at the country’s financial regulator preliminarily agreed to grant KB Securities the right to issue promissory notes late Wednesday, a business segment that is only open to brokerages with significant capital.

After the approval from the securities and futures commission at the Financial Services Commission (FSC), the FSC will hold another meeting to finalize the decision next Wednesday.

A promissory note is a short-term means of financing with less than one year maturity. Brokerages were banned from issuing such notes, but the top financial regulator amended the rule to nurture large-scale securities players back in 2016.

Presently, securities firms with over 4 trillion won ($3.4 billion) in capital are allowed to issue one-year promissory notes and provide wider corporate financing services.

Thanks to a merger with Hyundai Securities in 2016, KB already met the capital requirement, but its record of engaging in irregular activities such as unfair hiring delayed the decision.

Mirae Asset Daewoo and Samsung Securities also fulfill the criteria, but like KB, their involvement in illegal business practices got in the way of business expansion.

As for Mirae, the country’s largest brokerage is undergoing a probe by the Fair Trade Commission over an allegation that it unfairly made contracts with other affiliates while Samsung Securities is banned from entering new businesses until 2021 due to its fat-finger trading scandal last year.

In the meantime, smaller companies are beefing up their holdings of capital to be eligible for the promissory note offering.

Shinhan Investment, a brokerage unit under Shinhan Financial Group, will hold a board meeting to pass a proposal to raise 700 billion won in capital. The move is seen as an effort to meet the 4-trillion-won threshold with its current capital at 3.4 trillion won.

Other firms, such as Meritz Securities and Hana Financial Investment, are on track to push up their capital size.

If approved, the company will be the third brokerage after NH Investment & Securities and Korea Investment & Securities to get the green light on promissory notes.

After the preliminary approval from the securities and futures commission, the FSC is scheduled to grant final approval if there is no major issue.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]


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