[Digital Today reporter Sangyeop Oh (오상엽)] South Korea's Financial Services Commission has newly designated 7 SME-focused financial investment companies to support funding for small and venture firms. The designation period is 3 years from July 10 to July 9, 2029.

The FSC said on Wednesday it designated BNK Investment & Securities, IBK Investment & Securities, SK Securities, Leading Investment & Securities, Eugene Investment & Securities, Korea Asset Investment & Securities and Hanwha Investment & Securities as the sixth group of SME-focused financial investment companies.

The SME-focused financial investment company scheme was introduced in April 2016 to support funding for small and venture firms through capital markets and to foster small and midsize brokerages specialised in related work.

SME-focused brokerages are designated by the FSC after review by a selection committee made up of external experts, based on each firm's track record of financial support for small and venture firms.

The number of firms designated this time fell to 7 from 8 in the previous fifth group. The FSC said it conducted a strict screening, focusing on firms' capabilities and the effects of designation rather than the number of designees, as 10 years have passed since the scheme was introduced.

Since the scheme was introduced, SME-focused brokerages have provided small and venture firms with a total of 17.9 trillion won in direct and indirect support over about 10 years.

Specifically, they provided 9.2 trillion won through bond issuance, initial public offerings and paid-in capital increases. Support totalled 7.3 trillion won through fund management and direct investment and capital contributions, and 1.3 trillion won through services such as mergers and acquisitions advisory.

The FSC recently extended the designation cycle to 3 years from 2 years to raise predictability for SME-focused brokerages and strengthen incentives to supply mid- to long-term funding. As a result, the 7 firms designated this time will focus over the next 3 years on supplying venture capital to small and venture firms.

Additional incentives will also be provided. Korea Securities Finance will extend the maturity of securities-backed loans from the current maximum of 1 year to a maximum of 3 years from August, and it will introduce preferential rates and maturities for term repurchase agreements (RP).

Korea Development Bank will set up a new 50 billion won fund this year dedicated to SME-focused brokerages. Korea Growth Investment Corp will review setting up a dedicated fund next year. When selecting fund managers, additional points for SME-focused brokerages will be increased by more than 50 percent from the current level.

In the process of selecting managers for the People's Growth Fund, additional points will be newly introduced in some leagues. Industrial Bank of Korea plans to raise its capital commitments to funds set up by SME-focused brokerages to at least 100 billion won in the sixth group from 26.5 billion won in the fifth group.

The FSC and the Financial Supervisory Service plan to check the support performance of SME-focused brokerages on a semiannual basis in light of the incentive support. If necessary, they will also review a plan to additionally designate up to 3 firms within the 3-year designation period for the sixth group.

The FSC said, "We expect a virtuous cycle to be created in which small and venture firms and SME-focused financial investment companies grow together."