The South Korea Financial Services Commission has published a reform package to strengthen securities firms’ corporate financing role, centred on regulatory changes for comprehensive financial investment business entities (CFIBEs). The plan expands and refocuses CFIBEs’ corporate credit granting, revamps the dormant Investment Management Account (IMA) regime, and links promissory-note and IMA funding to a new requirement to channel 25 percent into venture capital while tightening real estate concentration limits, alongside measures for overseas expansion and stronger controls over derivatives-linked products. Corporate credit granting will be adjusted by excluding credit to financial companies and recalibrating credit to special purpose companies based on the ultimate use of funds, while broadening use of the supplemental credit-granting limit to cover M&A refinancing, syndicated lending participation, restructuring support, selected mid-market corporates, and non-recourse receivables financing for SMEs. CFIBEs eligible to handle promissory notes and with total assets of KRW 4 trillion or more will be required to supply 25 percent of promissory-note funding as domestic venture capital, and the maximum share of promissory-note assets used for real estate financing will be lowered from 30 percent to 15 percent in 2026 and 10 percent in 2027. For IMA, the FSC will clarify CFIBEs’ principal repayment obligation, require at least 70 percent of IMA products to have a minimum one-year maturity, cut the real estate financing limit from 30 percent to 10 percent immediately, and impose a 25 percent venture capital supply duty on IMA operating assets, while applying fund-style safeguards including a 5 percent seed-investment rule, periodic reporting, and restrictions on own-asset and cross trading. Risk controls include a new overall limit for promissory notes and IMA set at 200 percent of equity capital plus an additional 100 percent (with promissory notes capped at 200 percent), a 5 percent loss-reserve requirement for IMA capital under management with top-ups for valuation losses, and favourable net capital ratio treatment where reserves are sufficient; separate measures provide overseas expansion incentives, broaden prime brokerage counterparties, and tighten DLS/DLB internal loan limits (20 percent in 2026 to 10 percent in 2027) and leverage-ratio add-ons for DLB from 2026. The FSC expects most measures to be implemented through amendments to the Enforcement Decree and subordinate rules following a preliminary notice in the second quarter, with finalisation within the year, and plans a legislative bill in the second half of the year for the scope of corporate credit granting. Detailed measures on real estate financing soundness, liquidity management, and CFIBE soundness rules are due in June, while group-wide BIS capital adequacy ratio adjustments for bank holding company groups and other items will be announced in the third quarter; CFIBE designation applications will be received in the third quarter under current KRW 4 trillion (promissory notes) and KRW 8 trillion (IMA) criteria, with strengthened criteria and staged designation to follow after this year.
South Korea Financial Services Commission 2025-04-09
South Korea Financial Services Commission sets higher CFIBE credit capacity and requires 25 percent venture capital allocation from promissory notes and IMAs
South Korea's Financial Services Commission has unveiled reforms to enhance the corporate financing role of comprehensive financial investment business entities (CFIBEs). Measures include expanding CFIBEs' corporate credit, revamping the Investment Management Account regime, and imposing a 25% venture capital funding requirement. The reforms tighten real estate concentration limits, introduce risk controls, and incentivize overseas expansion, with implementation expected through regulatory amendments and a legislative bill later this year.