The Export-Import Bank of Korea (Korea Eximbank) will see limits eased on acquiring equity in small and venture corporations. Currently, it cannot acquire 15% or more of voting equity in corporations, but the government decided to lift this restriction for small and venture corporations only. The relaxation is expected to expand Korea Eximbank's role in productive finance.
According to the financial sector on the 4th, the government drew up this improvement plan as a follow-up to the amendment to the Export-Import Bank of Korea Act that allows Korea Eximbank to invest directly in corporations without linking the investment to loans or guarantees.
Earlier, in Dec. last year, the National Assembly passed an amendment to the Korea Eximbank Act allowing Korea Eximbank to invest directly in corporations. Previously, it could invest only in projects linked to loans or guarantees. As a result, from 2005 to last year, Korea Eximbank recorded just 11 cases of direct investment in total.
In line with the legal revision, the government decided to ease regulations so that when Korea Eximbank invests directly in small and venture corporations, it can acquire the corporations' voting equity without limit. Currently, except in special situations such as restructuring, Korea Eximbank cannot acquire more than 15% of a corporation's voting equity. This will lay the groundwork for Korea Eximbank to move beyond traditional investments via loans and guarantees, make long-term investments by acquiring equity, and share in performance with corporations.
It also set detailed criteria for direct equity investment. Equity investment is allowed when the expected rate of return from the investment meets or exceeds an internally set benchmark, taking into account risk and funding expense.
A Korea Eximbank official said, "When promoting investment-development projects, Korea Eximbank can now be involved from the initial stage, including recruiting and structuring investors."