Shinhan Investment & Securities said on the 24th that while Korea Investment & Securities and Mirae Asset Securities have stepped up as comprehensive investment account (IMA) operators, short-term profit and loss generation will be limited. It said this is because IMAs have a high share of long-term operations and carry a requirement to set aside loss provisions.
Im Hee-yeon, a researcher at Shinhan Investment & Securities, said, "Although it has become possible to engage in IMA business, it will take some time to contribute to earnings," adding, "Unlike short-term notes, it is difficult to generate short-term profit and loss because the share of long-term operations is high and there is an obligation to set aside provisions."
Earlier, the Financial Services Commission (FSC) on the 19th of this month designated Korea Investment & Securities and Mirae Asset Securities as comprehensive financial investment business operators with equity capital of 8 trillion won or more. An IMA is an account in which a securities company pools customers' deposits and invests in corporate finance-related assets, returning the revenue to customers, and the securities company bears a principal guarantee obligation.
Im outlined IMA expense burdens and regulatory items. An IMA is a principal-guaranteed product, and 5% of entrusted funds must be mandatorily set aside as loss provisions. In addition, 70% or more of raised funds must be operated as long-term assets of one year or more. There is also a regulation requiring 25% of the raised amount to be invested in venture capital.
Im expected, "As risks must be borne to meet the mandatory share of venture capital, operating capabilities and the risk management framework will be the key to performance."
However, this IMA business was assessed as likely to serve as an opportunity to expand securities companies' customer bases. As it is an account-type product that combines a higher potential rate of return than bank deposits with wealth management functions, it is highly likely to absorb demand from customer segments aiming to increase assets. Im said, "IMA is a factor that drives the strengthening of the wealth management (WM) base and is expected to support the growth of the business portfolio."