Key Takeaways
- • Rep. Kang Jun-hyun (Democratic Party of Korea) and industry participants called for securities firms to be licensed to operate Business Development Companies (BDCs) to expand venture capital supply to small and innovative enterprises.
- • Proposed reforms include relaxing the 40% lending limit, raising leverage from 0.5x to up to 2x net assets, and loosening the 10% single-company investment limits for equity and loans.
- • The Financial Services Commission excluded securities firms from BDC operating entities in 2022 over conflict-of-interest concerns, and Shinhan Asset Management's Shinhan Innovative Enterprise Growth Investment Trust No. 1 remains the only BDC launched since sales began on March 17.
- • Officials from the Financial Services Commission said trust and investor protection must be secured first, and the government will review areas for improvement.
Summary
A policy seminar at the National Assembly on Thursday, titled "Policy Seminar on Productive Finance Connecting the Growth of Small and Innovative Enterprises with National Asset Formation," heard calls to expand the set of entities permitted to run BDCs, according to MoneyToday (머니투데이). Rep. Kang Jun-hyun, a member of the Political Affairs Committee, argued that fiscal support alone is insufficient and that the market needs an investment environment comparable to Silicon Valley. Attendees included Hwang Sung-yeop, chairman of the Korea Financial Investment Association, and Kim Se-wan, director of the Capital Markets Institute.
BDCs are listed public funds that let retail investors access unlisted venture and innovative companies, and must invest more than 60% of fund assets in venture companies. Sales have been permitted since March 17, but the only BDC launched so far is Shinhan Asset Management's Shinhan Innovative Enterprise Growth Investment Trust No. 1, which targets professional investors. Hwang said the system was modeled on practices in the United States and United Kingdom and needs refinement to suit Korean market conditions.
Kim Jin-young, a research fellow at the Capital Markets Institute, proposed allowing securities firms to operate BDCs, phasing in relaxation of lending limits, and phasing in relaxation of leverage. He noted that the lending limit is currently 40%, that 76% of U.S. BDC products are loan-based as of 2025, and that leverage could rise from 0.5x to 2x net assets. The Financial Services Commission had included securities firms in a 2022 Capital Markets Act bill, but they were dropped after lawmakers raised conflict-of-interest concerns. Kim argued these concerns can be managed through internal control standards.
Industry participants raised further points. Lee Ok-hyung of Eugene Investment & Securities said the 10% single-company limits for equity and loans hinder follow-on investment, while the original 2022 bill set a 20% limit. Kang Ji-hoon of Romim said AI companies struggle to obtain bank loans, and Kang Jae-won of the SMEs Startups & Venture Research Institute questioned how loan-centric BDCs would differ from commercial lending.
Kim Seong-jin, Section Chief of the Asset Management Division at the Financial Services Commission, said securities firms' investment banking networks could help, but that securing market trust and investor protection comes first. The government's 2026 Tax Reform Plan, announced last August, proposes 9% separate taxation on BDC dividend income, capped at 100 million won in contributions, and includes BDCs among eligible investments for the Productive Finance ISA.
BDCs are listed public funds that let retail investors access unlisted venture and innovative companies, and must invest more than 60% of fund assets in venture companies. Sales have been permitted since March 17, but the only BDC launched so far is Shinhan Asset Management's Shinhan Innovative Enterprise Growth Investment Trust No. 1, which targets professional investors. Hwang said the system was modeled on practices in the United States and United Kingdom and needs refinement to suit Korean market conditions.
Kim Jin-young, a research fellow at the Capital Markets Institute, proposed allowing securities firms to operate BDCs, phasing in relaxation of lending limits, and phasing in relaxation of leverage. He noted that the lending limit is currently 40%, that 76% of U.S. BDC products are loan-based as of 2025, and that leverage could rise from 0.5x to 2x net assets. The Financial Services Commission had included securities firms in a 2022 Capital Markets Act bill, but they were dropped after lawmakers raised conflict-of-interest concerns. Kim argued these concerns can be managed through internal control standards.
Industry participants raised further points. Lee Ok-hyung of Eugene Investment & Securities said the 10% single-company limits for equity and loans hinder follow-on investment, while the original 2022 bill set a 20% limit. Kang Ji-hoon of Romim said AI companies struggle to obtain bank loans, and Kang Jae-won of the SMEs Startups & Venture Research Institute questioned how loan-centric BDCs would differ from commercial lending.
Kim Seong-jin, Section Chief of the Asset Management Division at the Financial Services Commission, said securities firms' investment banking networks could help, but that securing market trust and investor protection comes first. The government's 2026 Tax Reform Plan, announced last August, proposes 9% separate taxation on BDC dividend income, capped at 100 million won in contributions, and includes BDCs among eligible investments for the Productive Finance ISA.
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