Banks Won't Be Allowed to Enter Discretionary Investment Management Business

SEOUL, KOREA- Financial regulators have decided not to allow commercial banks to move in to the discretionary investment management business because they expect competition with incumbent players such as securities companies will become excessive. The business of discretionary investment management, whose market is estimated at around 400 trillion won a year, is for high net-worth individuals who delegate the day-to-day management of their investments to professionals.

Suh Tae-jong, director of capital markets at the Financial Services Commission, said on October 15, "The issue of permitting the discretionary investment management business to banks has always been something the banks wanted. We have not reviewed the matter and won't do it in the future."

Banks have insisted that they be allowed to operate in the business for the convenience of their private banking customers. In contrast, securities houses that have offered the business through their "wrap accounts" have opposed it. Securities companies are earning more than 20 percent of their net income from the wrap account business.

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