Big investment banks unlikely to come soon

Global economic woes may delay bills on large financial groups


Growing U.S. fiscal woes are stirring concern in Korea over a possible stall in the parliamentary passage of revised bills on capital market and financial investment businesses, calling for fostering American-style big investment banks.

The concern comes as a group of lawmakers are moving against the promotion of large-scale investment banks.

Some lawmakers reportedly said there is little need for the nation to adopt the new financial system and that stabilizing the financial market is currently a more urgent issue.

The situation resembles the policy problems of October three years ago, when the Financial Services Commission considered proposing the bill to the Nation Assembly.

Though the government had then pushed the same project, the 2008 global financial crisis discouraged the nation from promoting mergers and acquisitions among big brokerage houses.

“It seems that many lawmakers are putting more priority on ways to seek robust growth of financial companies and the stable financial market,” said an aide to Rep. Huh Tae-yeol of the ruling Grand National Party and chairman of the National Policy Committee of the National Assembly.

He predicted that it would not be easy for National Policy Committee lawmakers to agree the passage of the bill.

An aide to Rep. Park Sun-sook of the main opposition Democratic Party called the big investment banks or hedge funds unsuccessful U.S. models: “We basically oppose the revised bill.”

Though an aide to Rep. Kwon Taeg-kyo of the GNP acknowledged the importance of opening a new chapter for the local financial market, he said, “As our market has a variety of weak points, it is not alright if we blindly imitate foreign cases.”

Considering the present situation, the authorities should make technical adjustments if they want to introduce the new system.

Despite the wait-and-see attitude in the political sector, the FSC plans to propose the bill in October as scheduled.

An FSC official argued that managing market stability should be separate from developing the market.

The financial regular said in July that a big securities firm ― or an investment bank ― whose equity capital reaches 3 trillion won ($2.8 billion) will be entitled to extend loans to conglomerates.

Emphasizing that Korea’s five major securities firms’ average equity capital is equivalent to only 3.3 percent of that of Goldman Sachs, FSC officials forecast that the minimum requirement of 3 trillion won for lending business will accelerate M&As in the market.

By Kim Yon-se (kys@heraldcorp.com)