Improvement in Domestic Banks' Soundness Indicators... Total Capital Ratio Increased by 0.41%P at the End of Last Year

"Domestic Banks' Capital Ratios Exceed Regulatory Requirements and Demonstrate Stable Net Income"

[Asia Economy Reporter Park Sun-mi] The capital soundness of domestic banks has improved. It has been confirmed that all banks exceed the regulatory ratios including buffer capital.

According to the 'Status of Bank Holding Companies and Banks' BIS-based Capital Ratios (Provisional)' announced by the Financial Supervisory Service on the 17th, as of the end of 2020, the total capital ratio of domestic banks based on the Bank for International Settlements (BIS) standard recorded 15.00%, up 0.41 percentage points from the previous quarter-end and 1.08 percentage points from the previous year-end.

The total capital ratios based on BIS of the four major bank holding companies were in the order of Shinhan Financial Group (15.73%), KB Financial Group (15.27%), Hana Financial Group (14.18%), and Woori Financial Group (13.75%). Among banks, Shinhan Bank (18.47%), Kookmin Bank (17.78%), Woori Bank (17.20%), and Hana Bank (14.73%) had the highest ratios.

The common equity tier 1 capital ratio and tier 1 capital ratio of bank holding companies and banks as of the end of last year also recorded 12.45% and 13.47%, respectively. These figures rose by 0.31 percentage points and 0.37 percentage points from the previous quarter-end, and by 0.99 percentage points and 1.17 percentage points from the previous year-end, respectively. Total capital increased by 3.4 trillion won (0.9% increase) due to capital expansion such as net income and capital increase, and risk-weighted assets decreased by 30.9 trillion won (1.6%) due to the introduction of the Basel III final rules.

However, the simple tier 1 capital ratio recorded 6.39% as of the end of last year, down 0.03 percentage points from the previous quarter-end. This was due to the tier 1 capital growth rate (1.2%) lagging behind the total risk exposure amount growth rate (1.6%).

Currently, all domestic banks exceed the regulatory ratios including buffer capital. In particular, Industrial Bank of Korea and Korea Development Bank, which introduced the Basel III final rules in the fourth quarter, saw a significant decrease in risk-weighted assets, resulting in an increase in capital ratios. Kakao's capital ratio also increased after a capital increase in the fourth quarter of last year.

An official from the Financial Supervisory Service said, "At the end of last year, domestic banks' capital ratios exceeded regulatory ratios and net income was being stably realized," adding, "However, for some banks, conservative capital management is necessary as their common equity tier 1 capital ratios remain relatively low despite the application of the Basel III final rules." He continued, "We plan to induce effective capital management so that domestic banks can secure sufficient loss absorption capacity and maintain their funding functions."

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