Amid the South Korean government's recent push to expand venture capital supply, there has been a significant rise in the issuance of promissory notes with a maturity of less than one year. This increase heightens the liquidity risk management challenges for securities firms, which are facing a mismatch in their asset-liability maturities. According to sources, Korea Ratings is expected to release an annual analysis report by April that will highlight the status of asset-liability maturity mismatches in securities firms related to these promissory notes. The growing importance of these financial instruments has prompted plans for comprehensive reporting starting in 2025, focusing on firms engaged in promissory note transactions.

Promissory notes in South Korea can only be issued by securities firms that have a minimum equity capital of 4 trillion KRW and have received authorization from financial authorities. These instruments resemble fixed-term deposits offered by banks, promising investors returns at maturity. While they allow securities firms to procure funds at a relatively low cost, the investment returns typically exceed those of bank deposits. As of the end of last year, the outstanding balance of promissory notes reached approximately 48.5 trillion KRW, increasing by about 7 trillion KRW over one year. However, a growing size of promissory notes correlates with increasing health risks for securities firms as they also invest a portion of the financing into higher-yield long-term assets with maturities ranging from 5 to 30 years.

Excessive mismatch in the maturities of short-term funds and long-term investments can lead to liquidity risks, particularly when short-term funding sources become constrained. This limitation arises because liquidating long-term assets for immediate cash is often not feasible. Consequently, reputable credit rating firms, like Moody's, have begun reassessing the credit ratings of major securities firms, such as Korea Investment & Securities, which had its credit rating downgraded due to a high volume of outstanding promissory notes. Furthermore, as of 2024, the proportion of funds raised by domestic securities firms with maturities of less than one year has surged to 86.2%, marking an increase of 11 percentage points compared to a decade ago. In this evolving landscape, the government is also incentivizing securities firms to invest in venture capital, contributing to a growing number of firms authorized to issue promissory notes, with three out of the seven currently operating under this framework being affiliated with the current administration.