The South Korea Financial Services Commission reported that seven large investment banks subject to venture capital requirements supplied KRW 11.6 trillion in the second quarter of 2026, up 20.4% from the first quarter. Their recognized supply averaged 19.5% of commercial paper and investment management account funding, and all seven exceeded the 2026 regulatory minimum of 10%. The requirement, introduced in November 2025 as part of efforts to channel more capital to startups and other growth companies, rises to 20% in 2027 and 25% in 2028. The commission also set out reforms to strengthen brokerage research independence and expand small cap coverage. Measures include elevating the prohibition on undue influence over research into public regulation, reducing research budgets’ dependence on sales and corporate finance revenue, tightening controls on analysts’ support for sales teams, and using objective measures such as target price deviations in performance assessments and disclosures. Large investment banks would face a minimum small cap coverage ratio, with an illustrative threshold requiring at least one quarter of annual reports to cover companies below specified Korea Composite Stock Price Index and Korean Securities Dealers Automated Quotations market capitalization rankings. Firms with at least 40% small cap coverage in the previous year could receive a 5% uplift in recognized funding to small and venture companies when their venture capital ratio is calculated. The planned changes would also extend required research on initial public offering companies from at least twice in one year to at least twice annually for three years. The commission will review risk weighted recognition of venture capital investments once growth in overall supply stabilizes, potentially giving greater credit to higher risk venture equity than to guaranteed bonds or secured lending, and will continue quarterly monitoring.

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