Seoul Yeouido Financial District Skyline (Image courtesy of Yonhap)
SEOUL, Aug. 24 (Korea Bizwire) — South Korea’s major securities firms are intensifying efforts to break into the short-term note business, highlighting their commitment to venture capital investment amid tightening regulatory scrutiny.
Currently a 40 trillion-won ($30 billion) market, the short-term note sector is regarded as a critical funding channel for large investment banks. Only four firms — Mirae Asset, Korea Investment & Securities, NH Investment & Securities, and KB Securities — have been licensed to issue short-term notes, which are debt securities maturing in less than a year, backed by the firm’s own credit.
In April 2024, the financial authorities reopened the gate to new applicants for the first time in years, prompting five contenders — Samsung Securities, Hana Securities, Meritz Securities, Shinhan Investment, and Kiwoom Securities — to submit bids. Decisions are expected by October 2025 at the latest.
Regulatory changes slated for 2026 will raise capital requirements and impose stricter feasibility assessments, making this licensing round a now-or-never opportunity for many applicants. Complicating matters, some contenders are facing legal risks that may affect their eligibility under major shareholder suitability rules.
In response, the applicants have pledged aggressive support for venture capital — beyond current regulatory requirements. Under new rules announced in April, brokerages must allocate at least 10% of funds raised via short-term notes to venture capital by 2026, rising to 25% by 2028, while gradually reducing exposure to real estate finance.
Securities Firms Seek Nod for Issued Note Licenses as Deadline Looms (Image supported by ChatGPT)
Meritz Securities stated in a recent earnings call that it would “significantly exceed” mandated levels of venture capital investment, while minimizing real estate exposure. Hana Securities has internally committed to allocating at least 25% to venture capital in its first year if licensed.
Some firms have already built dedicated task forces and platforms to manage the business. Kiwoom upgraded its internal task force into a formal team under its investment division, while Hana is developing a digital platform to streamline venture capital investment from origination to execution.
The appeal is clear: short-term notes allow brokerages to expand leverage, diversify investments, and enhance annual profits by hundreds of billions of won depending on how the funds are deployed.
“Ultimately, the brokerage business is about leverage. Without short-term notes, firms lose a powerful tool to scale,” said one industry official. Another noted that demand for such products is strong among institutional and retail investors seeking fixed-return securities.
Office workers in Yeouido’s financial district (Yonhap)
While some caution that increased competition could squeeze profits, analysts say the real disruption may come from a parallel licensing track for IMA (Integrated Managed Account) services, which only three firms have applied for.
Still, for now, Korea’s brokerages are betting big that short-term notes will be the engine powering their next wave of growth.
M. H. Lee (mhlee@koreabizwire.com)
