SEOUL — South Korean financial authorities are tightening their grip on the liquidity management of local brokerage firms. In a decisive move to address the structural vulnerabilities exposed during the 2022 Legoland credit crunch, regulators announced plans to expand liquidity ratio requirements to all securities firms and introduce a sophisticated regulatory framework that factors in market volatility and contingent liabilities.

The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) jointly announced on May 18, 2026, that they are pursuing revisions to the "Financial Investment Business Regulations" and their enforcement rules.

The core of the revision is the drastic reinforcement of liquidity risk management across the securities industry. Under the current framework, stringent liquidity ratio regulations have primarily targeted major, large-scale brokerages. However, under the new measures, these requirements will be expanded to encompass all domestic securities firms, eliminating regulatory blind spots.

Furthermore, the authorities are completely overhauling how the liquidity ratio is calculated. The traditional metric simply divided liquid assets by liquid liabilities. In contrast, the newly proposed "New Adjusted Liquidity Ratio" will introduce a much more rigorous evaluation system.

Specifically, the new formula will apply a haircut (discount rate) to liquid assets to account for potential market price fluctuations. On the liability side, it will mandate the inclusion of contingent liabilities, such as debt guarantees. This adjustments aim to ensure that brokerages maintain enough actual buffer to survive severe market stress.

The financial authorities cited the lessons learned from the 2022 Legoland disaster as the primary catalyst for this regulatory shift. At the time, a default on developer debt tied to the Gangwon Province theme park triggered a severe freeze in the short-term money market. Asset-Backed Commercial Paper (ABCP) rollover failed extensively, forcing brokerages into acute liquidity shortages that ultimately required emergency liquidity injections from state-backed policy banks.

Beyond immediate liquidity ratios, the government is pushing for a broader overhaul of risk management systems. The financial authorities are currently revising regulations to raise the Net Capital Ratio (NCR) risk weights for real estate-related investments and to establish a new ceiling on total investment limits.

For Comprehensive Financial Investment Business Providers (large investment banks with expanded business scopes), the regulators are reviewing a differentiated capital regulation system. This tailored reform, aimed to be finalized by the end of this year, intends to transition the current NCR system into a stability-focused ratio framework while recalibrating risk weights to reflect their unique lending and deposit-taking operations.

The proposed revision to the Financial Investment Business Regulations will be under public notice for comment from May 21 to June 30, with the detailed enforcement rules expected to be announced later this month.

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