- Overview
- Capital Participation under the Act on Special Measures for Strengthening Financial Functions
- Forms of Participation
- Track Record of Capital Participation under the Financial Function Strengthening Act
Forms of Participation
Under the Act on Special Measures for Strengthening Financial Functions, capital participation may take the form of a subordinated loan method or an investment method. As of the end of September 2025, capital participation has been made through the investment method, which takes the following three forms:
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Where the recipient institution is a bank, capital participation is made by subscribing for preferred shares issued by the bank.
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Where the recipient institution is a cooperative financial institution, capital participation is made by having a central cooperative financial institution subscribe for preferred equity securities issued by the recipient institution, and RCC then subscribes for the trust beneficiary interest created by entrusting such preferred equity securities to a trust.
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Where RCC subscribes for preferred equity securities issued by a central cooperative financial institution, and that central cooperative financial institution then makes a direct capital contribution to the cooperative financial institution.
Forms of Participation (Investment Method)
Preferred Shares
Securities that allow investors to receive dividends and residual assets preferentially over common shareholders. In exchange, voting rights at shareholders meetings and other governance matters are generally restricted.
Trust Beneficiary Rights
Rights to receive profits generated from trust assets. The trustee (trust bank or trust company) holds ownerships of the trust assets and manages and operates them.
In the case of capital participation, the trust assets consist of preferred equity securities.
Preferred Equity Securities
Among securities similar to shares called equity securities, preferred equity securities are those that, like preferred shares, have priority over ordinary equity securities in terms of dividend payments or distribution of residual assets.
