The five major securities companies that have been designated as investment banks will receive a foreign exchange credit line of up to 10 percent of equity capital.
This means that they are allowed to provide offshore business loans and payment guarantees like banks, which constitutes the Korean government’s deregulatory measures in the financial sector. Under the circumstances, they are expected to be capable of directly procuring U.S. dollars by issuing foreign currency bonds and the like and not via banks for overseas M&A purposes.
According to the foreign exchange authorities, the Ministry of Strategy and Finance is planning to revise the Foreign Exchange Transaction Regulations within this year to allow credit offerings to KDB Daewoo Securities, Woori Investment & Securities, Samsung Securities, Korea Investment & Securities, and Hyundai Securities. The idea is to turn them into global-standard investment banks by facilitating their overseas business.
The authorities are going to start a demand survey in the near future as to the size of the foreign exchange resources that can be used in their overseas business. At present, the foreign exchange credit line is estimated at 10 percent of their equity capital. As of the end of June this year, their combined equity capital was 16.8777 trillion won (US$16.2519 billion).