New Liquidity Rules Start January

South Korea's securities firm liquidity regulations will expand to all firms starting January next year.

Small Firms Face Higher Liquidity Burden

Securities firms with capital below 1 trillion won face significantly higher liquidity ratios under new rules.

Short-Term Funding Reliance Doubled

Small firms rely on short-term collateralized funding at 71.2% of total borrowings, double comprehensive firms' 37.0%.

Liquidity Ratios Drop 12 Percentage Points

Korea Ratings estimates 1-month and 3-month liquidity ratios will fall to 106% and 104% from current levels.

Small Firms Near 100% Threshold

Bookook Securities, Cape Investment & Securities, and Hanyang Securities are already near the 100% liquidity ratio threshold.

Funding Structure Creates Risk

Small firms have higher reliance on short-term funding channels with limited options during market volatility.

RP Sales and Securities Sold Under Repurchase Agreements

Small firms use 41.6% of borrowings for RP sales and 29.6% for securities sold under repurchase agreements.

Shinhan Securities Analysts Expect Divergence

Shinhan Securities expects liquidity outcomes to diverge based on credit quality within small and mid-sized firms.

“Kim Sang-in, a research analyst at Shinhan Securities, said, "Large comprehensive IB securities firms face significant contingent liability burdens, but their liquidity risk is limited given that they have proactively increased bond issuance, diversified funding channels, and potential affiliate support."”

Liquidity Ratios Decline for Small Firms

Bookook Securities' 3-month liquidity ratio fell 50 percentage points from 155% to 105% over the past year.

Small Firms May Fall Below Threshold

Some small firms could fall below the 100% regulatory liquidity threshold under new standards.

Funding Restructuring Expected

Securities firms will likely restructure funding by reducing short-term and increasing long-term borrowing.