Samsung, Hanwha, and Other Financial Groups Increase Risk Response Capacity

Kyobo, Capital Adequacy Ranked No.1
Mirae Asset, Clear Downtrend
Samsung, Internal Transactions of 34 Trillion Won

[Asia Economy Reporter Oh Hyung-gil] Most financial groups with assets exceeding 5 trillion won have steadily increased their risk response capacity. On the other hand, Mirae Asset's capital adequacy ratio has decreased, indicating a need for capital management.

According to the financial sector on the 4th, six financial groups including Samsung (Samsung Life Insurance), Mirae Asset (Mirae Asset Daewoo), Hanwha (Hanwha Life Insurance), Hyundai Motor (Hyundai Capital), Kyobo (Kyobo Life Insurance), and DB (DB Insurance) disclosed their consolidated financial group reports as of the third quarter of 2020 through their representative companies on the 31st of last month. This is the second disclosure since the first one in September last year, covering 25 items such as ownership and governance structure, capital adequacy, and internal transactions.

The capital adequacy ratio, which evaluates the loss absorption capacity at the financial group level, was led by Kyobo among the six financial groups. The capital adequacy ratio is calculated by dividing eligible capital (loss absorption capacity) by required capital (the sum of minimum required capital by business sector).

Kyobo's capital adequacy ratio steadily increased from 332.9% in Q1 to 338.0% in Q2, and 342.9% in Q3. Samsung also increased its capital adequacy ratio significantly by 62.7 percentage points from Q1 to 312.2% through capital raising efforts. Hanwha's ratio rose by 20.5 percentage points from 240.8% in Q1 to 261.3% in Q3.

On the other hand, DB and Hyundai Motor's capital adequacy ratios slightly decreased to 215.3% and 177.7%, respectively, compared to the previous quarter. Notably, Mirae Asset's capital adequacy ratio has been declining since Q1, dropping from 165.9% in Q1 to 165.7% in Q2, and further to 162.2% in Q3.

The surplus capital, which is the difference between eligible capital and required capital, was highest for Samsung at 46.8903 trillion won. It was followed by Hanwha (10.884 trillion won), Kyobo (10.5534 trillion won), Hyundai Motor (7.2095 trillion won), DB (4.4844 trillion won), and Mirae Asset (4.1022 trillion won).

Although all financial groups exceeded the regulatory ratio of 100% set by financial authorities, they need to pay closer attention to managing their capital adequacy ratios going forward.

With the enactment of the "Act on the Supervision of Financial Conglomerates" at the end of last year, financial authorities have been able to manage and supervise financial groups starting from the second half of this year.

Financial groups with capital adequacy ratios below 100% or poor risk management must submit a management improvement plan to the financial authorities, including capital expansion or disposal of risky assets. If the plan is not implemented, the authorities may order prohibition of name usage or take measures according to each financial business law.

Meanwhile, Samsung's internal transactions among affiliates exceeded last year's scale. As of the third quarter, Samsung's internal transaction volume was 34.2351 trillion won, the largest among the six financial groups, surpassing the 33.2525 trillion won recorded in 2019.

Mirae Asset followed with internal transactions of 12.716 trillion won, then Kyobo with 10.6588 trillion won, Hanwha with 7.7143 trillion won, DB with 3.8655 trillion won, and Hyundai Motor with 601.4 billion won.

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