Financial Industry Turns Skeptical on CMCA
So far the hottest buzzword of the country's financial services industry this year must be the Capital Market Consolidation Act.
When the new legal system passed the national Assembly in July 2007, both the financial services industry and related governmental authorities made a big deal out of it, as if the new law was going to change the industry forever.
Now more than 10 days into the effectuation of the CMCA, however, the long-anticipated positive effects of the law are still not visible, while concerns have been raised about its unexpected side effects.
The new law allows financial companies to diversify into other areas, which means that the barrier that once existed among different types of financial services firms such as securities firms and asset management companies has been virtually lifted.
According to securities industry officials, though, the financial authorities have not even finalized the detailed official guideline required to evaluate the qualification of those companies seeking to expand into a neighboring business field. Under the circumstances, of course, not a single company has filed an application for a new business.
"We are going to launch a new decision-making board that consists of outsourced specialists soon, preparing for financial services companies' move into new business areas," a source at the Financial Services Commission said in a report yesterday. "We are also working on finalizing the guideline simultaneously," he added.
He said that the financial regulatory body will take a closer look at companies seeking expansion, as the ongoing financial turbulence - which neither the financial authority nor the companies expected when the law was framed - is changing the financial conditions here and abroad to an uncontrollable degree.
Financial services firms, on the other hand, complain that the authorities are leaving the door wide open. "We have been working on a new project for a long time, but we haven't made an application yet because of the commission's lack of preparation and strict stand it maintains on new business proposals," a high official of a financial services firm told Yonhap News Agency yesterday.
"Enhancing the financial industry's competitiveness through the law seems to have a long way to go," he continued.
Analysts at major financial companies are also coming up with negative forecasts on the law's short-term effects on the market.
"The strengthened investor protection measures under the CMCA will decrease the sales of risk-laden financial products such as equity-type funds and over the counter derivatives," JP Morgan Securities Services said in a recent report.
"Since the unfavorable market conditions are discouraging securities companies to introduce new funds or derivatives products, it is too early to say that the law will have a positive effect on the companies," it went on.
Local securities firms are overall skeptical about the changes the law will bring in the near future.
"Despite its original purpose, the CMCA won't create new businesses for securities firms, because quite a few of them are already running their own asset management companies, and more than that, because expanding their business won't guarantee increased profitability under the current economic conditions," Taurus Investment & Securities said in a report.
By Lee Yong-sung
(source: http://www.koreaherald.co.kr)
When the new legal system passed the national Assembly in July 2007, both the financial services industry and related governmental authorities made a big deal out of it, as if the new law was going to change the industry forever.
Now more than 10 days into the effectuation of the CMCA, however, the long-anticipated positive effects of the law are still not visible, while concerns have been raised about its unexpected side effects.
The new law allows financial companies to diversify into other areas, which means that the barrier that once existed among different types of financial services firms such as securities firms and asset management companies has been virtually lifted.
According to securities industry officials, though, the financial authorities have not even finalized the detailed official guideline required to evaluate the qualification of those companies seeking to expand into a neighboring business field. Under the circumstances, of course, not a single company has filed an application for a new business.
"We are going to launch a new decision-making board that consists of outsourced specialists soon, preparing for financial services companies' move into new business areas," a source at the Financial Services Commission said in a report yesterday. "We are also working on finalizing the guideline simultaneously," he added.
He said that the financial regulatory body will take a closer look at companies seeking expansion, as the ongoing financial turbulence - which neither the financial authority nor the companies expected when the law was framed - is changing the financial conditions here and abroad to an uncontrollable degree.
Financial services firms, on the other hand, complain that the authorities are leaving the door wide open. "We have been working on a new project for a long time, but we haven't made an application yet because of the commission's lack of preparation and strict stand it maintains on new business proposals," a high official of a financial services firm told Yonhap News Agency yesterday.
"Enhancing the financial industry's competitiveness through the law seems to have a long way to go," he continued.
Analysts at major financial companies are also coming up with negative forecasts on the law's short-term effects on the market.
"The strengthened investor protection measures under the CMCA will decrease the sales of risk-laden financial products such as equity-type funds and over the counter derivatives," JP Morgan Securities Services said in a recent report.
"Since the unfavorable market conditions are discouraging securities companies to introduce new funds or derivatives products, it is too early to say that the law will have a positive effect on the companies," it went on.
Local securities firms are overall skeptical about the changes the law will bring in the near future.
"Despite its original purpose, the CMCA won't create new businesses for securities firms, because quite a few of them are already running their own asset management companies, and more than that, because expanding their business won't guarantee increased profitability under the current economic conditions," Taurus Investment & Securities said in a report.
By Lee Yong-sung
(source: http://www.koreaherald.co.kr)
