Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Brokerage industry warned of consequences for poor project financing risk management
Financial Supervisory Service Governor Lee Bok-hyun, second from left, speaks during a meeting attended by representatives of the brokerage industry at the Korea Financial Investment Association's headquarters in Seoul, Wednesday. Yonhap
By Lee Yeon-woo
Financial authorities criticized the brokerage industry for its reliance on the real estate business and warned that they would hold firms accountable that fail to manage real estate project financing risks effectively.
"I urge for a meticulous risk analysis of project financing sites, followed by the prompt and decisive resolution of any poorly performing sites," Financial Supervisory Service (FSS) Governor Lee Bok-hyun said during a meeting with representatives of the brokerage industry on Wednesday.
"Should a failure in risk management by certain companies contribute to instability in the financial markets, we will impose stringent and justifiable accountability on the respective securities firms and their executives."
On Wednesday, financial authorities, including the FSS, the Financial Services Commission (FSC), the Korea Exchange (KRX), and the Korea Financial Investment Association (KOFIA), held a meeting with 10 brokerage companies.
The attendees included CEOs from KB Securities, NH Investment & Securities, Mirae Asset Securities, Samsung Securities, Korea Investment & Securities, Daishin Securities, Shinyoung Securities, DB Financial Investment, JPMorgan Chase and Morgan Stanley.
Lee hinted at his intention to intensively overhaul the management of project financing risks, saying "a callus should be removed in order to heal."
"Despite the challenges faced by some financial and construction firms, we will have to persevere and carry out the restructuring process with much greater intensity than stated previously," Lee told the reporters after the meeting.
Regarding the self-capital ratio of project financing project implementers, he said, "Engaging in real estate development is no longer desirable unless the responsibility can be nearly 100 percent assumed by the developers themselves." The current self-capital ratio is between 5 percent and 10 percent.
Lee also urged brokerage firms to maintain sufficient reserves to prepare for potential project financing risks.
Meanwhile, at the meeting, FSC Chairman Kim Joo-hyun reaffirmed his commitment to push for regulation reform, while KRX Chairman Sohn Byung-doo vowed to combat illegal short selling. KOFIA Chairman Seo Yoo-seok expressed disappointment over a series of recent financial accidents, pledging to establish a robust internal control system to prevent future occurrences.