Stock earnings tax proposal needs 'review from zero,' FSS says

Financial Supervisory Service (FSS) Gov. Lee Bok-hyun, second from right, speaks during a meeting with the CEOs of domestic brokerages in central Seoul on Tuesday. [YONHAP]

The head of Korea's financial regulator and the CEOs of domestic brokerages struck a cautious note regarding a planned capital gains tax on stocks in a meeting Wednesday.

Lee Bok-hyun, chief of the Financial Supervisory Service (FSS), told executives of 16 securities firms that the plan needs to be “reviewed from zero.”

The CEOs expressed opposition to the proposal, which was introduced under the former Moon Jae-in administration. Under the policy, retail investors would owe 20 to 25 percent on gains greater than 50 million won ($3,599) from the trading of local stocks.

The head of the financial regulator also urged securities firms to change the way they do business, as well as where they invest, stressing the need for innovation to ensure growth.

“The tasks aimed at developing our capital market that I have stressed must be discussed in a comprehensive manner, and must not be an issue of energy-consuming disputes between specific ideologies or political factions,” he said in the meeting.

“Securities firms must become pacemakers in that process, instead of simple brokers,” Lee added.

“For us to achieve our goal of developing our capital market, an active role and cooperation of securities firms are important. Securities firms cannot remain simple brokers as they have and should instead become pacemakers that are trusted by both listed firms and investors.”

The FSS chief stressed the need for securities firms to increase their investment in unconventional sectors.

“The market asks why our country does not have an innovative firm while cheering for Nvidia, which is spearheading the development of artificial intelligence,” he noted.

“To find a Korean Nvidia, we must change the old business practice of securities firms that chase only easy investment opportunities such as real estate project financing [PF],” he added. “We need them to act as 'core providers' who supply funds to innovative firms in promising sectors such as AI and big data that will provide future growth engines.”

Lee also called for efforts to minimize the possible fallout from short-term real estate PF loans going defunct and asked the heads of securities firms to “pre-emptively” manage their liquidity risk.

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