Latest Headlines
Monthly F/X Market Trends
KDB Swap/Option Price
Home
>
Market Data & Reserch
> Latest Headlines
No bank "wrap accounts"
Writer : Sender
Jul 29, 2010
Local banks expressed disappointment yesterday at a government decision that would prevent them from offering "wrap accounts" or personalized portfolios, to customers.
The Financial Services Commission announced it would revise regulations that would only allow banks to conduct investment consultation services, but not tailored asset management services.
The proposed changes are expected to take effect on Nov. 18.
Wrap accounts are becoming popular in Korea, with 11 trillion won ($9.3 billion) in assets in them this year, up from 7.4 trillion won a year ago, according to industry sources.
The accounts combine brokerage services, advice on asset management and discretionary management for a fixed fee.
The FSC said banks have no need to offer wrap account services since most of them belong to holding companies that also own brokerages and asset management firms, which already offer them.
"An 'in-house' operation is not needed since banks already operate money market trust services, which are quite similar to a wrap account-type business," said the FSC.
Banks were shocked by the decision, since they were preparing to launch wrap account products around November this year after the government recently revised the banking act to allow commercial banks to expand into new product areas.
"For now, I guess there is not much that we can do about it, but I think it is quite unfair how banks are the only ones prohibited [from operating wrap account business] while securities firms and insurance firms are allowed," said an official from a local commercial bank who wished to remain anonymous.
However, local brokers and asset managers welcomed the news. "If banks were to enter the wrap account market, securities firms would be significantly damaged," said Pyo Jin-soo, section chief of the wrap account department at Hyundai Securities.
An official at another local asset management firm said, "It was seen as a wise decision taking into account the possible side effects that would result from excessive competition."
Apart from the revised banking rule, the FSC also plans to consider measures to increase the banks' covered bond issuance with the aim to help them raise long-term funds at lower costs. Covered bonds are debt securities backed by quality assets such as cash flows from mortgages or public sector loans.
(Source: JoongAng Daily)
Previous :
S. Korea's 2010 trade surplus expected to near US$30 bln
Next
:
June bank loan rates fall
