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With the commercial paper (CP) market restructured into a landscape of eight competitors, the total outstanding balance is now on the verge of surpassing 60 trillion won. This rapid expansion comes as the government, promoting so-called "productive finance," has doubled the number of comprehensive financial investment firms (so-called “investment banks”) authorized to issue CPs in the past year, emphasizing their role in supplying venture capital. As interest rate and funding competition intensifies, each firm’s ability to manage operational risks and maintain profitability is emerging as a critical challenge.

According to the financial investment industry as of June 30, the combined outstanding balance of commercial papers issued by Korea’s seven authorized operators reached 55.9291 trillion won. Compared with the end of June last year, when there were only four operators (with 44.3912 trillion won in outstanding balance), the amount grew by 11.5379 trillion won (26.0%) in just one year. It also increased by 4.6291 trillion won (9.0%) in just six months, compared with the end of December 2025 (when the balance was 51.3 trillion won).

This rapid growth in market size largely reflects the series of new market entrants beginning in December of last year. Products offering relatively high interest rates, primarily from the newly authorized short-term finance operators—Kiwoom Securities, Hana Securities, and Shinhan Investment & Securities—have heightened market competition. Typical one-year commercial paper rates remain in the upper 3% range, with some special promotions reaching into the 4% range per annum.

An industry source commented, "With the entry of new players this year and the prevailing trend of rising interest rates, the competition in funding, rates, and management has become much more intense. There’s a scramble to secure attractive deals." As of end-June, the outstanding balance for the three latecomers was: Kiwoom Securities at 1.8159 trillion won, Hana Securities at 999.2 billion won, and Shinhan Investment & Securities at 289.9 billion won, totaling 3.105 trillion won. In addition, Samsung Securities recently received government approval, becoming the eighth commercial paper issuer.

Commercial paper enables securities firms to raise short-term funds based on their own equity, with a simpler process and higher operational flexibility than issuing public bonds. The funds raised can be deployed toward high-yield investment banking (IB) activities such as corporate finance, acquisition finance, and project financing (PF). As such, the CP business is regarded as a core infrastructure for securities firms’ mid- to long-term growth strategies.

However, despite the dramatic increase in the number of operators, the overall market structure has not changed significantly. As of end-June, the outstanding balances among the four incumbent operators were: Korea Investment & Securities at 22.4679 trillion won, KB Securities at 11.0031 trillion won, Mirae Asset Securities at 10.5776 trillion won, and NH Investment & Securities at 8.7751 trillion won—comprising nearly 95% of the total market. Notably, Korea Investment & Securities alone accounts for about 40% of the entire market, firmly retaining its position as the leading player. The composition is followed by KB Securities (19.7%), Mirae Asset Securities (18.9%), and NH Investment & Securities (15.7%), forming a “one major, three strong” market structure.

Recently, incumbent operators have been showing signs of curbing their pace. The outstanding balance of CP at NH Investment & Securities fell by 398.7 billion won (down 4.3%) from 9.1738 trillion won at the end of March to 8.7751 trillion won by the end of June. In the same period, KB Securities’ balance dropped by 454.2 billion won (4.0%), from 11.4573 trillion won to 11.0031 trillion won. As some products now offer interest rates approaching 4% per annum, increasing funding costs, these moves are seen as a type of profitability control. An industry official explained, "In an environment of rising interest rates, the focus is on profitability rather than aggressively expanding balances."

Looking ahead, the key issue will be how each firm manages the operational risks of deploying their raised funds amid increasingly fierce competition over interest rates. Because CP is a short-term funding tool backed by a firm’s own capital, it is crucial to secure a stable margin between the cost of capital and investment return. The government’s demand to expand the supply of venture capital further underscores the importance of managing investment destinations. Given that CP typically has short maturities, managing maturity mismatches in mid- to long-term deployment is also vital.

The market entry of Samsung Securities, which is set to launch its first products later this month, is expected to add another variable. Samsung Securities possesses competitive wealth management (WM) capabilities targeted at high-net-worth clients, which is likely to intensify competition for customers with the incumbents. As of the first half of the year, Samsung Securities’ equity stood at 8.1566 trillion won. Applying the maximum permissible limit for CP issuance, this translates to a potential funding capacity of up to 16.3 trillion won. Meanwhile, Meritz Securities, which applied for the CP license alongside Samsung Securities, is still undergoing government review.

An industry source noted, "With rising interest rates, new player entries, and even policy demands to expand venture capital supply, the operational challenges for securities firms are mounting." The source added, "After the 60 trillion won mark is surpassed, the real battle in the CP market will be not just about growing balances, but about how efficiently firms manage funding costs and how stably and profitably they deploy the capital they raise."

This content was produced with the assistance of AI translation services.