Seven securities firms have been designated as 6th-term SME-specialized financial investment companies by South Korea's Financial Services Commission, effective from the 10th of this month for a three-year period. The designated firms are BNK Investment Securities, IBK Investment Securities, SK Securities, Leading Investment Securities, Eugene Investment Securities, Korea Asset Investment Securities, and Hanwha Investment Securities. The designation aims to strengthen capital market fundraising channels for small and medium-sized enterprises, with the selection committee conducting stricter evaluations after a decade since the system's 2016 launch. Leading Investment Securities newly entered the lineup, while the total number of designated firms decreased from eight in the 5th term to seven. Since the system's introduction approximately 10 years ago, these specialized securities firms have provided a total of 17.9 trillion won in direct and indirect funding to SMEs and venture companies through stock and bond issuance support, fund operations, direct investments, and M&A advisory services.
Seven Firms Designated for 6th Term with Stricter Selection Process
According to the Financial Services Commission on the 10th, the seven designated 6th-term SME-specialized securities companies are BNK Investment Securities, IBK Investment Securities, SK Securities, Leading Investment Securities, Eugene Investment Securities, Korea Asset Investment Securities, and Hanwha Investment Securities. The designation takes effect from the 10th of this month and remains valid for three years. Leading Investment Securities newly entered the 6th-term lineup, while the total number of designated companies decreased by one from the previous 5th term's eight firms.
The Financial Services Commission explained that after 10 years since the system's introduction, the strict evaluation process focused on verifying individual companies' substantive capabilities and designation effects rather than simply increasing the number of designations. The selection committee was composed entirely of external members who first selected the top four companies through quantitative evaluation, then compressed the final designation targets by combining qualitative evaluations including presentations for the remaining applicants.
Designation Period Extended from Two Years to Three Years
The designation period has been extended from the previous two years to three years. This measure follows the revision of related operational guidelines in May, aimed at encouraging designated securities firms to establish funding supply plans from a mid-to-long-term perspective and sustainably continue venture capital investments.
The SME-specialized securities company system has served as a direct financing channel for small and medium-sized enterprises and venture companies since its launch in April 2016.
17.9 Trillion Won in Total SME Funding Over 10 Years
Over approximately 10 years since the system's introduction, the total direct and indirect funding these securities firms have provided to SMEs and venture companies amounts to 17.9 trillion won. By fundraising method, stock and bond issuance (distribution) support including bond issuance, initial public offerings (IPOs), and paid-in capital increases accounted for the largest portion at 9.2 trillion won, followed by fund operations and direct investments/capital contributions at 7.3 trillion won, and M&A advisory services at 1.3 trillion won.
Korea Securities Finance Extends Loan Maturity to Three Years Starting August
Authorities have decided to introduce a series of substantial additional incentives after consultations with related organizations to actively encourage venture capital supply by SME-specialized securities firms. Korea Securities Finance will significantly extend the maturity of securities collateral loans from the existing maximum of one year to three years starting in August to support long-term fundraising. New benefits include applying preferential interest rates lower than other companies during repurchase agreement (RP) transactions and setting the maturity at one month, more than double the market standard maturity of 14 days.
KDB Creates 50 Billion Won Dedicated Fund This Year
Support from policy financial institutions will be strengthened. Korea Development Bank will create a new 50 billion won dedicated fund for SME-specialized securities firms within this year and has decided to expand the bonus points granted when selecting fund managers by more than 50% compared to before. A new system will be introduced to grant bonus points to SME-specialized securities firms in certain areas such as challenge/small leagues and regional dedicated fund leagues when selecting National Growth Fund managers.
IBK Expands Investment Scale to Over 100 Billion Won
Industrial Bank of Korea has decided to significantly expand its investment scale in funds established by SME-specialized securities firms from the 5th term level of 26.5 billion won to over 100 billion won in the 6th term, which is expected to substantially reduce the burden of fund matching. Korea Credit Guarantee Fund and Korea Technology Finance Corporation will maintain preferential measures that partially exempt participation restrictions such as total assets and equity capital requirements when selecting P-CBO issuance lead managers and grant bonus points.
Semi-Annual Monitoring and Potential Addition of Up to Three Firms
The government and financial authorities have a policy to implement follow-up measures without disruption for the early settlement of these new incentives. The Financial Services Commission and the Financial Supervisory Service plan to monitor the support performance of securities firms receiving incentive benefits on a semi-annual basis. Additionally, a plan to additionally designate up to three SME-specialized securities firms within the three-year designation period in accordance with market conditions is also under consideration.
FAQ
What did South Korea's Financial Services Commission do on the 10th of this month regarding SME-specialized securities firms?
The Financial Services Commission designated seven securities firms as 6th-term SME-specialized financial investment companies effective from the 10th of this month for a three-year period. The designated firms are BNK Investment Securities, IBK Investment Securities, SK Securities, Leading Investment Securities, Eugene Investment Securities, Korea Asset Investment Securities, and Hanwha Investment Securities.
How much total funding have SME-specialized securities firms provided since the system's introduction?
Since the system's introduction approximately 10 years ago in April 2016, these securities firms have provided a total of 17.9 trillion won in direct and indirect funding to SMEs and venture companies. This includes 9.2 trillion won in stock and bond issuance support, 7.3 trillion won in fund operations and direct investments, and 1.3 trillion won in M&A advisory services.
What new incentives will Korea Development Bank and Industrial Bank of Korea provide to SME-specialized securities firms?
Korea Development Bank will create a new 50 billion won dedicated fund for SME-specialized securities firms within this year and expand bonus points for fund manager selection by more than 50%. Industrial Bank of Korea will significantly expand its investment scale in funds established by these firms from 26.5 billion won in the 5th term to over 100 billion won in the 6th term.
