The FSC announced financial policy plans to support Korea’s innovation-led economic growth. At a proclamation ceremony, President Moon Jae-in said further growth of innovative start-ups in Korea are held back by banks’ lending practice, still centered on real estate collateral and financial records, resulting in a “financial divide” between large businesses and start-ups. That requires finance to play a more active role in funding innovation and sharing risk. FSC Chairman Choi JongKu laid out a comprehensive policy scheme to create a financial ecosystem for innovation-led growth.
I. Overhaul bank’s corporate loan approval system
Banks’ corporate loan approval system will be overhauled to help start-ups - often with limited collateral - secure loans using their innovative ideas, technology and other various assets as collateral. Under the new loan approval system, the FSC aims to enable innovative start-ups and SMEs to secure loans worth KRW100 trillion over the next three year.
► A new collateral scheme will be introduced1 in which corporate borrowers are allowed to combine various assets including patent, production equipment and inventories as a single package of collateral.
► A comprehensive evaluation model which assesses the potential value of a company’s technology as well as creditworthiness will be introduced as early as 2020.
II. Capital market reforms
The FSC will help innovative start-ups raise funds based on their growth potential. By easing listing requirements, the FSC aims for Kosdaq listings of 80 companies in high-growth, high-tech sectors including biotech over the next three years.
► The government aims to raise KRW15 trillion over the next five years with public and private investments to support scale-ups in new-growth sectors such as future vehicles, bio-health and fintech.
► The FSC will expand a pool of venture capital with regulatory reforms for private equity funds (PEFs), securities firms and professional investors.2
► Kosdaq listing requirements will be tailored to sector-specific needs of new industries – e.g. biotech. New listing standards will be established, differentiated from those for the manufacturing sector, to better reflect their growth potential.3
► As an incentive to boost venture capital investments, the government will cut tax rates on securities transactions by 0.05%p for listed stocks on Kospi and Kosaq and unlisted stocks.4
III. Finance industrial innovation
The FSC will financially support business reshuffling of SME manufacturers in key industries and business innovation in the service sector.
► The government will provide KRW12 trillion over the next three years to finance SME manufacturers’ business reshuffling and R&D investment.
► The government will provide KRW60 trillion over the next five years to boost growth in the service sector – e.g. tourism, health care, contents and logistics.
* Please refer to the attached file for details.