Seoul: The financial regulator announced plans to overhaul regulations on investment banks (IBs) to stimulate increased investments in smaller firms and assets with higher risk but greater profitability.
According to Yonhap News Agency, the Financial Services Commission (FSC) revealed that the new regulatory framework will allow IBs to engage more actively in corporate restructuring and extend their reach to smaller firms by relaxing the limits on credit lines. IBs with a capital base of 4 trillion won (approximately US$ 2.69 billion) or more will be mandated to allocate 25 percent of capital raised through commercial bill issuance into riskier yet potentially lucrative assets, such as low-rated firms and high-yield funds.
Conversely, the current 30 percent investment cap on commercial bill-funded real estate ventures will be gradually reduced to 15 percent by 2026 and further to 10 percent the following year. This shift aims to counterbalance the existing trend where local IBs predominantly invest in safer, low-yield options like real estate.
The FSC also intends to broaden the scope of IB licenses by relaxing associated regulations within the year. The specifics of these changes will be determined and announced later, as stated by the regulator.