Key Takeaways
- • South Korea's Financial Supervisory Service (FSS) urged securities firms to strengthen soundness, liquidity management and internal controls as corporate paper and integrated margin account (IMA) markets expand.
- • Corporate paper and IMA funding reached 59.5 trillion won at end-June, up from 52.5 trillion won at end-2025 and 41.5 trillion won at end-2024; IMA outstanding rose to 3.6 trillion won from 1.2 trillion won.
- • Venture-capital supply by comprehensive financial investment businesses rose 19.0% to 15.9511 trillion won in Q2 from 13.4040 trillion won in Q1, while its ratio to corporate paper and IMA funding reached 26.8%.
- • The FSS is preparing best practice risk management standards for corporate credit provision and separately refining information barrier and conflict-of-interest rules with industry.
- • Regulators warned against high-yield corporate paper beyond sustainable levels and urged caution on the recently implemented temporary exemption from margin loan collateral ratio requirements.
Summary
The FSS held a meeting on Wednesday at the Korea Financial Investment Association with chief risk officers and heads of investment management from nine comprehensive financial investment businesses to discuss strengthening risk management and internal controls tied to corporate paper and IMA. Seo Jae-wan, assistant governor for the FSS's financial investment division, said the market is expected to keep growing, citing new corporate paper approvals at two firms and an expansion of products eligible for inclusion in retirement pensions. He stressed that investor protection and a stable supply of venture capital depend on high-level risk management and internal controls.
According to the FSS, corporate paper and IMA funding rose to 59.5 trillion won as of end-June from 52.5 trillion won at the end of last year and 41.5 trillion won at the end of 2024. IMA outstanding increased to 3.6 trillion won from 1.2 trillion won at end-last year. The regulator urged firms to take pre-emptive steps against deterioration in high-risk assets, including overseas investments, amid uncertainty over interest rates and stock prices. It said high-yield corporate paper products, launched alongside recent rises in market interest rates, should be managed at sustainable levels, and told firms to strengthen liquidity and payment capacity management, including stress analysis, contingency funding plans and recovery plans for long-term managed assets.
On venture capital, the FSS prioritized qualitative improvement over scale. Venture-capital supply by comprehensive financial investment businesses rose 19.0% to 15.9511 trillion won at end-Q2 from 13.4040 trillion won at end-Q1, and its ratio to corporate paper and IMA funding increased 3.4 percentage points to 26.8% from 23.4%. The regulator called for identifying technologically capable, high-growth companies in investment blind spots and diversifying supply channels. It cited KB Securities reviewing investments in innovative firms, including regional artificial intelligence companies, after receiving venture fund proposals through its venture-capital investment platform.
The FSS said it is preparing best practice standards for corporate credit risk management with the industry. These would cover reviewer expertise and independence, review criteria for business, industry and financial risks and repayment plans, and post-monitoring of credit status. Firms must prevent conflicts of interest with proprietary assets and establish effective information barriers, and a task force with the industry is working on the scope of information, criteria and operating procedures. Finally, the FSS urged caution regarding the recently implemented temporary exemption from margin loan collateral ratio maintenance, asking firms to clearly disclose application standards and enforce existing self-regulation measures to avoid expanding debt-financed investing. Attending firms said they would revisit investor protection systems and incorporate supervisory guidance into internal rules.
According to the FSS, corporate paper and IMA funding rose to 59.5 trillion won as of end-June from 52.5 trillion won at the end of last year and 41.5 trillion won at the end of 2024. IMA outstanding increased to 3.6 trillion won from 1.2 trillion won at end-last year. The regulator urged firms to take pre-emptive steps against deterioration in high-risk assets, including overseas investments, amid uncertainty over interest rates and stock prices. It said high-yield corporate paper products, launched alongside recent rises in market interest rates, should be managed at sustainable levels, and told firms to strengthen liquidity and payment capacity management, including stress analysis, contingency funding plans and recovery plans for long-term managed assets.
On venture capital, the FSS prioritized qualitative improvement over scale. Venture-capital supply by comprehensive financial investment businesses rose 19.0% to 15.9511 trillion won at end-Q2 from 13.4040 trillion won at end-Q1, and its ratio to corporate paper and IMA funding increased 3.4 percentage points to 26.8% from 23.4%. The regulator called for identifying technologically capable, high-growth companies in investment blind spots and diversifying supply channels. It cited KB Securities reviewing investments in innovative firms, including regional artificial intelligence companies, after receiving venture fund proposals through its venture-capital investment platform.
The FSS said it is preparing best practice standards for corporate credit risk management with the industry. These would cover reviewer expertise and independence, review criteria for business, industry and financial risks and repayment plans, and post-monitoring of credit status. Firms must prevent conflicts of interest with proprietary assets and establish effective information barriers, and a task force with the industry is working on the scope of information, criteria and operating procedures. Finally, the FSS urged caution regarding the recently implemented temporary exemption from margin loan collateral ratio maintenance, asking firms to clearly disclose application standards and enforce existing self-regulation measures to avoid expanding debt-financed investing. Attending firms said they would revisit investor protection systems and incorporate supervisory guidance into internal rules.
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