June 22, 2018

FSS puts brakes on Samsung Securities’ mega IB ambitions

PUBLISHED : August 10, 2017 - 16:41

UPDATED : August 10, 2017 - 16:41

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[THE INVESTOR] Korea’s financial regulator has put on hold its review of Samsung Securities’ application for issuance of promissory notes, delaying its efforts to become a mega investment bank, the financial unit of the nation’s largest conglomerate said in a regulatory filing on Aug. 10.

The Financial Supervisory Service has notified the firm that the review process has been suspended due to the ongoing trial of Samsung Electronics Vice Chairman Lee Jae-yong, who is in prison on allegations of offering a combined 43.3 billion won to former President Park Geun-hye’s long-time confidante Choi Soon-sil in return for business favors. The review will be resumed after the court’s final verdict by end-August, it said.

Issuing promissory notes is a new business allowed for IBs that have more than 4 trillion won (US$3.49 billion) in capital and is expected to be a new income generator.

The largest shareholder of Samsung Securities is Samsung Life Insurance in which Lee’s father, Samsung Electronics Chairman Lee Kun-hee, owns a 20.76 percent stake and he owns 0.06 percent.

“Samsung Life Insurance not Lee Jae-yong is the largest shareholder of Samsung Securities,” said an official at the securities firm. “But it seems the regulatory authorities consider him as the de-facto largest shareholder.”

Samsung Securities is among five securities firms including Mirae Asset Daewoo and Korea Investment & Securities which applied for mega IB licenses and short-term financing business with the FSS in July.

In May, the financial authorities unveiled plans to nurture mega IBs by revising the enforcement decrees of the Financial Investment Services and Capital Markets Act and regulations on financial investment business.

The plans allow financial institutions with a net worth of over 4 trillion won to issue, trade, broker and acquire promissory notes with one-year maturity. An eligible FI may issue promissory notes worth up to twice its capital.

Samsung Securities expanded its capital above 4 trillion won in order to engage in short-term financing but the decision by the FSS will make it a latecomer as the other four companies applied for approval in July and their applications are under review.

On Aug. 10, shares of Samsung Securities fell almost 5 percent, underperforming the benchmark KOSPI which dropped 1 percent.

By Park Ga-young (

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