By Kim Tae-gyu
Staff Reporter
Samsung Securities, an affiliate of Korea's top chaebol Samsung Group, is poised to take on local banks in an uphill battle to attract the country's billions of dollars in idle money.
The Seoul-based brokerage said Monday that it will try to draw a big chunk of the 500 trillion won ($334 billion) in idle money through launching re-sellable corporate bonds.
In time with the launch of the Financial Investment Services & Capital Markets Act (FSCMA), formerly known as the capital market consolidation act, some observers claim Samsung is looking to compete in the banking sector.
``Despite their high interest rates, domestic investors have turned a blind eye to bonds due to fears that they may not be converted into cash easily,'' Samsung Securities executive Jung Bum-sik said.
``In order to clear away such concerns, we will perform market-making functions ourselves _ we will repurchase bonds when clients want to sell them but there is little demand,'' he said.
The re-sellable retail bonds include some overseas products and local corporate bonds of Samsung Total, Samsung Card and CJ Cheil Jedang.
Jung noted that this is the first time a Korean brokerage has guaranteed the repurchase of corporate bonds.
``Down the road, we plan to extend the scope of re-sellable bonds to other low-risk companies. We hope to draw much idle money through this,'' Jung said.
The debut of the re-sellable corporate bonds, however, is likely to ignite a controversy once more that a ``Samsung Bank'' is imminent with the advent of the new capital market act.
The FSCMA, which went into effect early this month, breaks down the barriers between brokerage, futures and asset management.
Although the banking area is an exception, the distinction is also blurred. For example, securities firms will be allowed to handle payments and transaction businesses midway through this year.
``The Samsung Group is banned from having a banking unit due to bank ownership restrictions and the group vowed not to wade into the industry early last year,'' a Seoul analyst said.
``But what if salaries of 250,000 Samsung Group employees are paid into Samsung Securities accounts? What if Samsung Securities woos lots of idle money? Does Samsung then have a bank or not?'' he asked.
``From ships to chips'' is a phrase used to describe Samsung Group, which has the world's runner-up shipbuilder Samsung Heavy Industries, and top memory chipmaker Samsung Electronics under its wings.
The country's biggest conglomerate has prominent affiliates including Samsung Life Insurance, Samsung SDI, Samsung Card and Samsung Engineering & Construction.
In other words, Samsung makes its presence felt across the nation in almost every field, excluding banking.
Experts think, however, that things may change so that a ``Samsung Bank'' can come into existence.
The first possible way is that Samsung's financial companies, such as Samsung Securities, play the role of banks based on the FSCMA.
Another option is through deregulation.
Currently, non-financial firms are banned from holding over a 4 percent stake with voting rights in banks but the government is looking to raise the cap to 10 percent.
In addition, indirect investment through private equity funds (PEF), a pooled investment vehicle involving several original financiers, may lead Samsung to acquire banks, according to Prof. Kim Sang-jo at Hansung University.
``The Lee Myung-bak administration is looking to let any PEF that has industrial capital as its main investor acquire banks, which may end up enabling chaebol to buy banks,'' Kim said.
``Then, chaebol will be able to control banks in the future when the ceiling on ownership is further lifted. I hope my fears don't materialize,'' said Kim, who is also famous as an anti-chaebol activist.
Early last year, when the FSCMA was finalized, Samsung Group promised not to enter the banking industry, but some doubted the pledge.
``A decade ago, Samsung promised it would not advance into the passenger car business, and you know what happened afterward. We have to keep an eye on whether or not the promise will be followed-up on,'' Prof. Jun Sung-in of Hongik University said.