Banks, No More Venture Investment

As the return on venture investment decreases, commercial banks stop the investment de facto, and lots of venture businesses will suffer financial difficulties. Banks tend to withdraw from the investment such as dissolving the teams in charge of.

▽Stop venture investment from the second half of this year= Kookmin Bank that merged 3 subsidies such Frontier Investment etc in this year has stopped the new investment since 2001 actually. The last investment of Koonmin Bank was 7 billion won in 2000.

Hana Bank reduced the size of investment from 9.4 billion won in 2000, 7.0 billion won in 2001 and 1.8 billion won in this year. Additionally the bank reduced the number of staff from 5 to 2 and merged with Small and medium Business team.

Hanmi Bank reduced the investment from 7.0 billion won of 15 cases to 4.2 billion won and merged the duty of venture investment into Comprehensive Financial Team.

Shinhan Bank reduced the investment from 47.7 billion won in the last year to 4.47 billion won, and Chohung Bank reduced from 7.0 billion won to 42 billion won. Most these banks invested only in the first half of this year and not in the second half.

In case of Woori Bank and Foreign Currency Banks, the amount of investment increased, but most of the investment was performed in the first half of this year and restrains in the second half of this year.

The only bank that maintains venture investment is Small and Medium Enterprise Bank (SMEB). However, the investment is decided on political base, not on market profits to develop small and medium business.

Yu Chun-young, the Manager for Public Relations of SMEB spoke “The investment is decided at the level of supporting existing venture custom business, not at the level of making profits.”. It means that the new investment is not genuine venture investment.

▽No more venture investment= the stoppage of venture investment was due to the decrease of return on venture investment as the venture bubble disappearing.

Cho Sung-kwun, the Team Leader of Public relation of Woori Bank forecasted “Venture investment was profitable in 2000, but the profitability began to drop rapidly from 2001.” And added “In te future, most of banks will not invest on venture business.”

Some sources analyzes that banks extend loan to small and medium business and stop venture investment.

Yun Won-chul, Team vice Leader of Investment Finance of Kookmin Bank forecasted “Healthy venture business can borrow money from banks easily, so it does not welcome banks` investments, and in banks` position, they can not invest in insolvent venture business. So there is not opportunity for banks to invest.” And added “Even if KOSDAQ market becomes revitalized, banks are reluctantly to invest on venture business.”

Kwu-Jin Lim mhjh22@donga.com