Early Implementation of Basel III Final Rules by 15 Banks at Month-End... Relief for COVID-19 Corporate Loans

[Asia Economy Reporter Kim Hyo-jin] The final Basel III credit risk reform will be gradually implemented early from the end of this month at some banks and bank holding companies. It is expected that the capital regulation burden on banks will be reduced, allowing loans to companies affected by the novel coronavirus infection (COVID-19) to be made more actively.

The Financial Services Commission and the Financial Supervisory Service announced on the 28th that early implementation of the Basel III final plan has been confirmed for 15 banks and 8 bank holding companies.

The Basel III final plan includes lowering the risk weights for small and medium-sized enterprise (SME) loans and the loss rates in case of default for some corporate loans. The risk weight for SME loans without credit ratings will be reduced from 100% to 85%, and the loss rates in case of default for unsecured loans and real estate-secured loans among corporate loans will be lowered from 45% to 40% and from 35% to 20%, respectively.

As a result, the Bank for International Settlements (BIS) capital adequacy ratio is analyzed to increase by an average of 1.91 percentage points for banks and 1.11 percentage points for bank holding companies. The Basel III final plan will be implemented sequentially, starting with 3 companies at the end of this month, 15 companies by the end of September, 2 companies by the end of this year, 2 companies by the end of March next year, and 1 company by the end of June next year.

The Basel III final plan is a reform plan for the calculation method of banks' risk-weighted assets recommended by the Basel Committee under the BIS. The financial authorities finalized this plan after receiving early implementation applications from banks until last month.

SC Bank, Citibank, Kakao Bank, and K Bank, which did not apply for early adoption, will implement the Basel III final plan from January 2023.

The financial authorities stated, "The increase in the BIS ratio due to the early implementation of the Basel III final plan and the resulting capital capacity are expected to be utilized to support the real economy, such as providing funds to companies and small business owners struggling due to COVID-19."

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