SEOUL, May 13 (Korea Bizwire) — South Korea’s market for promissory notes issued by mega investment banks (IBs) is expected to grow sharply this year to top the 10 trillion won (US$8.5 billion) mark, industry sources said Monday.
The outstanding value of promissory notes floated by two mega IBs — Korea Investment & Securities Co. and NH Investment & Securities Co. — came to a combined 8.5 trillion won as of end-April.
Promissory notes issued by Korea Investment & Securities accounted for 5.4 trillion won, with NH Investment & Securities taking up the remainder.
Korea Investment & Securities is seeking to raise the amount to 6 trillion won by the end of this year, and NH Investment & Securities, to 4 trillion won.
In light of their plans, the outstanding amount of promissory notes issued by mega IBs is on course to reach 10 trillion won this year.
South Korean securities firms with 4 trillion won or more in assets are classified as mega IBs, which are allowed to issue short-term notes with a maximum limit of 200 percent of their capital.
Currently, there are five mega IBs in South Korea. Korea Investment & Securities and NH Investment & Securities are the only ones that have received the green light to float promissory notes, whose proceeds can be used for corporate and mortgage loans.
Watchers said the market for mega IBs’ promissory notes is likely to expand further as KB Securities Co. is poised to enter the market soon.
Last week, KB Securities received the go-ahead for promissory note issuance from the Securities Futures Commission. South Korea’s top financial regulator, the Financial Services Commission, is slated to make a final decision on Wednesday.
KB Securities reportedly has plans to issue promissory notes worth around 1.8 trillion won this year.
Two other mega IBs are Mirae Asset Daewoo with 8.2 trillion won in equity capital and Samsung Securities Co. with 4.7 trillion won. The two have yet to receive approval to issue promissory notes.
Analysts predicted the market for IBs’ promissory notes to grow further down the road as smaller brokerage houses are set to toss their hat in the ring after raising their net worth.