Time for Creation of 'Myth'

KSDA Chairman Hwang urges financial firms to go abroad for business

Chairman Hwang Kun-ho of the Korea Securities Dealers Association (KSDA) said in a recent article that he wrote for a financial paper that the Korean economy has, in a rather short period, experienced astonishing growth that has fostered a manufacturing industry with strong exports. The industrial structure has faithfully performed its role in leading the economy where it is today.
But, for the Korean economy to join the advanced economies in a true sense of the word, he said that there is still a gap in its growth engines. It is the financial services sector, which is a globally-competitive industry. This area is truly an advanced industry that can create high-quality jobs with high a value-added portion, he added.
In Korea, too, the financial industry has reached a point where it should enjoy higher recognition as an industry itself, along with its traditional role of providing funds to other industries. But when considering the international competitiveness of the industry, it has a lot of room for growth as it only ranked 43rd among the 46 countries surveyed by the Financial Times.
Fortunately, the Capital Markets Consolidation Act has laid the foundation for the further development of the financial industry. For the industry to fulfill its expected role as a new growth engine, it has to move overseas in a positive manner with its domestic operation as a base.
In order to make a solid overseas advance, the financial companies should draw up two sets of strategies, one for advanced countries and the other for emerging countries. It is necessary for Korean financial companies to go abroad to sustain growth, much like the manufacturing industry has done, because the domestic financial market is not big enough.
We have to look at what UBS and ABN Amro have done. They have successfully globalized their operations despite their small domestic financial markets to the extent that their overseas incomes make up over 70 percent of total earnings.
For advanced countries, Korea must strengthen its in-bound business strategies so that foreign capital will keep flowing into the country. For emerging markets, Korea must find targets for investment in those countries, taking advantage of low domestic interest rates and abundant funds. Korean banks, due to their smaller size, can be more flexible and nimble in their operations than the large investment banks in advanced countries.
As for the forms of operation, Korea has to consider either the possibility of sending manpower to a foreign country and explore markets or take over local financial companies through M&As. HSBC has been relying on these kinds of tactics using enormous amounts of capital as their weapon. Countries in Southeast Asia have rather limited financial markets and operation expenses have escalated. Korean financial companies making inroads into those countries, with the exceptions of India and China, should be prepared to specialize or divide up the operations due to the limited nature of their financial markets.
Manpower must also be better trained to manage risks. The government should further ease financial regulations to pave the way for local firms to make inroads into overseas financial markets.
The Korea Securities Dealers Association enforces self-regulatory rules to maintain fairness and raise public and institutional confidence in the securities market.
KSDA's rules include fair practice rules covering investment solicitation, customer management and advertising by member firms and securities employees. It also regulates the securities underwriting business, agreements management of securities companies, disclosure of OTC bond trading and securities listing.
KSDA maintains ongoing communication with the government, which highly regards the recommendations proposed by the KSDA.
The recommendations include constructive comments or suggestions on policy issues or other matters of concern that may improve various rules and regulations related to securities matters.
KSDA operates the Investor Protection Center to provide investors with materials, education and advice on the rules and regulations relevant to investing.
KSDA has commenced a new service involving financial transaction inquiries. Since it is time-consuming to confirm the existence of the securities accounts of the deceased, incompetent or missing, this service provides the heirs of such accounts the convenience of having the KSDA conduct a comprehensive check with the members of brokerage firms on their behalf. nw

Chairman Hwang Kun-ho of Korea Securities Dealers Association.