Financial authorities are facing skepticism regarding their decision to temporarily suspend the obligation for securities firms to maintain a 140% collateral maintenance ratio for margin loans. Critics argue that this measure merely shifts the burden of potential losses and reserve requirements onto brokerage firms and shareholders.
According to the financial investment industry on November 9, the Financial Services Commission and the Financial Supervisory Service announced a three-month exemption from the collateral maintenance ratio requirement, effective from today until January 31, 2027. This allows securities firms to implement detailed measures.
Responses from securities firms vary. Mirae Asset Securities and KB Securities have lowered the collateral maintenance ratio for domestic stocks from 140% to 130%, while Daishin Securities plans to adjust the ratio by 10 percentage points for individual stocks over the next month. NH Investment & Securities will apply the 130% ratio only to accounts with prior consent.
Conversely, Korea Investment, Kiwoom, Shinhan Investment, and LS Securities have introduced a margin call suspension system for eligible clients. Meritz Securities has decided to extend the collateral replenishment period by one day for accounts with a ratio above 120%. Samsung Securities plans to lower the collateral ratio by 10 percentage points for one day and then operate a suspension application system.
Hana Securities combines the ratio reduction with a one-time suspension, while Hanwha Investment & Securities has lowered the ratio to 130% while simultaneously increasing the minimum guarantee rate from 40% to 50% and reducing the discount rate for margin call quantities from 30% to 20% as part of its risk management strategy.
The varied responses from the securities industry highlight the structural limitations of the measure. The issuance of a non-action letter by financial authorities merely exempts firms from administrative penalties for violating the 140% rule. If stock prices fail to rebound and investors cannot repay their debts, the burden of provisioning for losses will fall entirely on the securities firms.
There are also concerns that the suspension of margin calls will not serve as a practical remedy. With increased market volatility due to the impact of the U.S. midterm elections and concerns over regulations on artificial intelligence data centers, merely delaying the timing of margin calls could lead to greater depletion of investors' principal and larger final losses.
Market participants criticize this measure as a form of 'socialization of losses,' where the risks associated with individual investors' autonomous investment failures are shifted onto securities firms, shareholders, and frontline employees under the guise of policy.
One industry insider stated, "If stock prices do not rise during the suspension period, individual investors will ultimately incur greater losses, which will then be shouldered by securities firms, shareholders, and frontline employees. This is a typical populist policy where investment profits are privatized while losses are blamed on the state or institutions."
Additionally, the differing application methods and suspension criteria among securities firms have compounded the burden on frontline staff, who must navigate the suspension procedures and respond to customer complaints in the event of further stock price declines.
Another market participant warned, "Without fundamental supply and demand measures, merely postponing the execution of margin calls is akin to slowly turning the needle on a time bomb. When the suspension period ends, a larger volume of margin calls could flood the market, increasing volatility."
* This article has been translated by AI.
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