Bank Soundness Remains Strong, BIS Ratio Rises for Second Consecutive Year

[Asia Economy Reporter Song Hwajeong] Last year, the capital ratios indicating the soundness of domestic banks rose for the second consecutive year.

According to the Financial Supervisory Service on the 2nd, at the end of last year, domestic banks' Common Equity Tier 1 (CET1) ratio, Tier 1 capital ratio, total capital ratio, and simple Tier 1 capital ratio based on the Bank for International Settlements (BIS) standards were recorded at 12.99%, 14.19%, 15.53%, and 6.51%, respectively. The CET1 ratio, Tier 1 capital ratio, and total capital ratio increased by 0.54 percentage points, 0.72 percentage points, and 0.53 percentage points compared to the end of the previous year.

This was due to an increase in capital from profit expansion and capital increases. Although risk-weighted assets increased by 5.9% (KRW 112.8 trillion) compared to the end of last year due to loan growth, total capital increased by 9.7% (KRW 27.7 trillion), driving the rise in capital ratios. Despite dividends of KRW 6.9 trillion, total capital increased through consolidated net income of KRW 23.8 trillion and capital expansion (capital increase of KRW 4.6 trillion, issuance of hybrid capital securities of KRW 4.7 trillion, etc.).

In the case of the simple Tier 1 capital ratio, the growth rate of Tier 1 capital (11.6%) exceeded the growth rate of total risk exposure amount (9.9%), resulting in a 0.10 percentage point increase compared to the end of the previous year.

As of the end of last year, all domestic banks exceeded the regulatory ratios (including capital conservation buffer and D-SIB additional capital). Four banks?Kakao Bank, which conducted a capital increase, and DGB, Hana, Woori, and BNK, which saw a decrease in risk-weighted assets due to the adoption of the Basel III final accord or approval of the internal ratings-based approach?showed significant increases in capital ratios compared to the end of the previous year. Kakao Bank's total capital ratio rose by 15.62 percentage points from the end of the previous year to 35.65%. On the other hand, six banks (Citibank, SC, Export-Import Bank, Industrial Bank, JB, and Suhyup) saw declines in total capital ratios as risk-weighted assets from loans and others increased more than capital or capital decreased.

The total capital ratio of eight bank holding companies at the end of last year was 15.54%, up 0.91 percentage points from the same period last year. Twenty non-holding banks maintained the same level as last year at 16.52%.

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