Expanding Productive Finance... Securities Industry Must Serve as Core Platform for Venture Capital

KCMI and Korea Financial Investment Association Hold Seminar on Strategies to Expand Productive Finance
Yoon Byungwoon of NH Investment & Securities: "Restoring the Fundamental Corporate Finance Function is Essential"
Seo Jeonghak of IBK Investment & Securities: "Incentives Needed for SME-Focused Securities Firms"

In order to expand "productive finance," which is being promoted as a key initiative by the Lee Jaemyung administration, it was suggested that the securities industry should actively engage in venture capital investment. At the same time, it was recommended that incentive policies such as expanding the approval of commercial papers and Integrated Investment Accounts (IMA), as well as strengthening tax support, should be implemented in parallel.

The Korea Financial Investment Association and the Korea Capital Market Institute jointly held a seminar on the 15th at the Bull's Hall of the Financial Investment Association in Yeouido, under the theme "The Role and Growth Strategy of the Securities Industry for Expanding Productive Finance." From left to right: Cho Daehyung, Professor of Economics at Suncheon National University; Son Jongmin, Director of Planning and Management at Hanwha Investment & Securities; Song Kyungjae, Director of Strategic Planning at Eugene Investment & Securities; Lee Junseo, Professor at Dongguk University Business School; Seo Junghak, President of IBK Investment & Securities; Seo Yooseok, Chairman of the Korea Financial Investment Association; Yoon Byungwoon, President of NH Investment & Securities; Park Yongrin, Vice President of the Korea Capital Market Institute; Choi Sujung, Head of Research at the Small and Medium Business Venture Research Institute; Lee Choonghoon, Head of IB Division at Samsung Securities; Kim Dongsik, Head of Management Strategy at Hana Securities. Korea Financial Investment Association

The Korea Financial Investment Association and the Korea Capital Market Institute held a seminar on October 15 at the Bull's Hall of the Financial Investment Center in Yeouido, together with experts from the securities industry and academia, under the theme "The Role and Growth Strategy of the Securities Industry for Expanding Productive Finance."

This seminar was organized to explore the direction of the securities industry, which should play a key role at the center of the capital market, the core platform for productive finance. At this point in time, the role of "productive finance," which drives the real economy and industrial innovation through the capital market, is becoming increasingly important. Accordingly, participants shared a responsible vision for the securities industry as the main agent driving industrial growth and restructuring, and discussed concrete implementation strategies and areas for improvement.

Park Yongrin, Vice President of the Korea Capital Market Institute, gave a presentation under the theme "The Role of the Securities Industry and Policy Tasks for Expanding Productive Finance." As policy tasks to achieve this, he suggested: expanding the approval and designation of commercial papers and IMAs; establishing a foundation for participation in corporate growth collective investment vehicles; resuming permission for new technology business finance; vitalizing the system for securities firms specializing in small and medium-sized enterprises (SMEs); and easing the risk value for Net Capital Ratio (NCR) applied to venture capital investments, along with strengthening tax support.

He emphasized, "Productive finance expands sustainable growth engines and channels market funds from non-productive to productive sectors," adding, "The securities industry must serve as a core platform that supports stage-by-stage fundraising for innovative companies and intermediates venture capital."

Byungwoon Yoon, President of NH Investment & Securities. NH Investment & Securities

Yoon Byungwoon, President of NH Investment & Securities, gave a presentation titled "The Era of True Corporate Finance: Productive Finance Supporting the Growth and Restructuring of Advanced Industries."

Yoon pointed out that the domestic financial investment industry has so far been passive in investing in new growth industries. He explained, "As of last year, 48% of the investment banking (IB) work of comprehensive financial investment business entities was focused on project financing (PF) debt guarantees, while venture capital accounted for only about 2% of total assets," and "Compared to the United States, the proportion of investments in the new economy is significantly lower, acting as a bottleneck for industrial innovation."

He thus emphasized that the financial investment industry must restore its fundamental "corporate finance function." To this end, he said it is necessary to support the growth of companies during the "missing middle" funding gap and to promote industrial restructuring through the regeneration and revitalization of traditional core industries. He explained, "We must move away from simply generating profits or focusing on real estate project financing (PF)," and "become a lever for productive finance that drives the growth of innovative companies and the restructuring of traditional industries."

Seo Junghak, President of IBK Investment & Securities. Photo by Yoo Hyunseok

Seo Jeonghak, President of IBK Investment & Securities, presented on "The Current Status and Improvement Tasks of Securities Firms Specializing in SMEs." The system for securities firms specializing in SMEs was introduced in 2016 to foster small and medium-sized securities firms specializing in corporate finance that support the use of the capital market by small and venture businesses. Since its introduction, the system has supplied approximately 13 trillion won in venture capital over about 10 years.

However, he explained that there is a lack of substantial incentives for participation in the operation of the system, so improvements are necessary. To address this, he emphasized the need to strengthen effective incentives, such as easing the NCR application standards for venture capital investment, reducing the burden on underwriters for SME initial public offerings (IPOs), expanding opportunities to participate in dedicated funds, and relaxing lending conditions. Seo stressed, "It is impossible for comprehensive financial investment business entities alone to supply venture capital to about 8 million SMEs and 40,000 venture companies," adding, "Only with the participation of small and medium-sized securities firms can detailed support be provided."