The backgrounds behind the pursuit of an integrated capital market law -- a law related to the financial investment industry and the capital market -- to go into effect in 2008, are to establish a regulation system that can flexibly respond to the rapidly changing conditions of the financial market and to overcome the limitations of the current financial regulation system.
Recently, the competition in financial markets all over the world has been intensifying. The work distinction among banks and securities companies and the limitations of their business entry have been disappearing.
Due to the advancement of information technology, the business conditions of the financial market have been changing. Also, financial institutions are being integrated as can be seen in the case of financial holding companies. Accordingly, it has become necessary to improve the regulation system so that it can better respond to such a change.
It can be evaluated that above anything else the integrated capital market law is a plan for seeking the invigoration of the Korean capital market. The development of a capital market that can smoothly perform the financial mediator function for promising venture companies and the like is very important from the perspective of cultivating new dynamic industries for national growth. In addition, the dominance of colossal banks and financial holding companies has been strengthened, and the foreign capitals that have acquired Korean financial institutions have embarked on full scale business expansions. In such surroundings, the development of the capital market is important for strengthening the competitiveness of the financial industry itself, too.
In the future, it is expected that when the establishment of large-scale financial investment companies like Goldman Sachs and Merrill Lynch becomes visible in Korea, the financing of business enterprises will move from the one that centers on indirect financing by the existing commercial banks to financing by large-scale financial investment companies. Through this, the smooth mediation functions in support of innovative small- and medium-sized enterprises and venture companies will be promoted more. And there is a high probability that, through the invigoration of mergers among the non-banking financial institutions, the aggrandizement of secondary financial institutions in Korea will take place in earnest.
However, there are some potential elements limiting the growth of financial investment companies. These are the overheated competition among financial services, the competitiveness gap with prominent overseas investment banks, the poor management of large-scale investment banks and its subsequent transfer to financial system risks and the insufficient expertise of investment banking services.
As a result, policy support must be provided for a certain period for large-scale financial investment companies to grow. At the same time, a strategy must be laid out to make financial services up to a certain high standard, including the training of professionals for the development of advanced financial products and services.
In addition, it is important to improve the financial supervision function to strengthen the soundness of large-scale financial investment companies. Concerning the economic effects resulting from the implementation of the integrated capital market law, focus should be placed on the development of the whole financial industry, and not limited aspects of an individual financial sector. For this, the interest clashes among related businesses must be considered. In the medium to long term, there is a need to unfold policies that can suffice both the development and stability of the financial industry at the same time.