Korea Investment & Securities, Korea‘s fifth-largest securities firm by net worth, moved a step closer in obtaining the rights to lend to local corporations, and is now awaiting the approval of the country’s top regulator, expected next week.

On Wednesday, the Securities and Futures Commission sent approval of the short-term debt instrument license of Korea Investment & Securities to its umbrella body and Korea’s top financial watchdog, the Financial Services Commission.

Financial authorities are aiming to permit securities firms with more than 4 trillion won ($3.6 billion) of equity capital to issue corporate promissory notes due to mature in one year, for as much as double their capital retention.

If the FSC makes the final decision in the meeting slated for next week, Korea Investment & Securities would become the first “homegrown giant investment bank” by embarking on the credit business.

Decisions on other candidates -- Mirae Asset Daewoo, NH Investment & Securities and KB Securities -- were not announced.

The four firms plus Samsung Securities were eligible for the new credit business and applied for the approval after the FSC in May sought to nurture a giant investment bank, but the SFC decision implies the four securities firms have yet to meet eligibility requirements.

The screening process of Samsung Securities was suspended in August on the bribery allegations of its largest shareholder, Samsung Electronics’ de facto chief Lee Jae-yong, during the former President Park Geun-hye administration. Lee was convicted in August and is awaiting an appeal.

In related news, the Bank of Korea said Thursday it is seeking to team up with brokerages for its foreign exchange reserves management. The central bank unveiled plans to allow local brokerages to trade foreign bonds for its reserve management, citing local brokerages’ maturity in the businesses, with some of them being able to execute trades on their own account.

The BOK has partnered with an undisclosed number of foreign investment banks and local asset management firms for the reserve management.

Such moves by financial authorities and the central bank in South Korea appear aimed at giving local securities firms more business momentum, as firms are largely struggling to secure profits due to falling commission fees.

Brokerage firms graded above BBB- by international credit appraisers while providing high management capacity and low cost would become eligible for the BOK partnership, the bank’s foreign reserve manager Lee Jung told press Thursday.

The BOK will accept applications until Nov. 24 and will not make the results public.

By Son Ji-hyoung 
(consnow@heraldcorp.com)