Kyobo Surpasses Samsung... Ranked No.1 in Capital Adequacy Among Financial Conglomerates

Sharp Increase... The Entire Industry Maintains Stable Levels
Must Prepare for Increased Volatility Next Year

Financial Supervisory Service, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

In the first half of this year, among the seven financial conglomerates, Kyobo's capital adequacy ratio surpassed Samsung's to take first place. Most financial conglomerates maintained a stable capital adequacy ratio exceeding the regulatory requirements. However, concerns were raised that uncertainty would increase in the second half due to tightening policies, expanded volatility in interest rates and exchange rates, and the application of new insurance accounting standards.

According to the Financial Supervisory Service on the 8th, the capital adequacy ratio of the seven financial conglomerates?Samsung, Hanwha, Kyobo, Mirae Asset, Hyundai Motor, DB, and Daou Kiwoom?was 196.6% in the first half of this year. This represents an increase of 9.0 percentage points compared to the end of the previous year, significantly exceeding the regulatory ratio of 100%. The capital adequacy ratio is calculated by dividing the total equity capital of the entire financial conglomerate by the sum of the required capital mandated by regulations.

The rise in the capital adequacy ratio was due to the increase in equity capital (the numerator) outpacing the growth in required capital (the denominator). The equity capital of financial conglomerates reached 176.5 trillion KRW in the first half of this year, an increase of approximately 55.4 trillion KRW compared to the previous year. This increase is attributed to the introduction of the new solvency regime (K-ICS) in the insurance sector, which recognizes Contractual Service Margin (CSM)?the profit from insurance contracts amortized annually?as available capital and evaluates insurance liabilities at market value, thereby increasing consolidated equity capital.

During the same period, required capital (the sum of regulatory capital requirements and risk management capital) rose from 64.6 trillion KRW to 89.8 trillion KRW, an increase of about 25 trillion KRW. This was influenced by the introduction of K-ICS, which added new insurance risks (such as longevity, lapses, expenses, and catastrophes) for insurance-affiliated conglomerates, and increased market risk due to domestic and international uncertainties.

The highest capital adequacy ratio was recorded by Kyobo at 244.1%. Samsung, which was first last year, dropped 13.3 percentage points to 216.7%. This was followed by Daou Kiwoom (216.0%), DB (212.0%), Hanwha (171.2%), Hyundai Motor (159.5%), and Mirae Asset (156.7%).

Kyobo also led in terms of the increase compared to the end of last year, with a rise of 69.6 percentage points. This was followed by DB (up 46.1 percentage points), Hanwha (up 22.4 percentage points), and Mirae Asset (up 9.9 percentage points). During the same period, Samsung (-13.3 percentage points), Daou Kiwoom (-5.1 percentage points), and Hyundai Motor (-3.1 percentage points) saw decreases.

Meanwhile, financial authorities designate and manage conglomerates engaged in two or more sectors among deposit-taking, insurance, and financial investment businesses as financial conglomerates each year. This is to prevent issues such as risk transfer among affiliates within conglomerates that are not structured as holding companies.

A Financial Supervisory Service official stated, "As monetary tightening continues in the second half, volatility in interest rates and exchange rates will increase, and with the issuance of guidelines related to IFRS 17 application, earnings volatility will also rise. We will closely monitor the soundness status and capital adequacy ratios of each financial conglomerate and encourage strengthening risk management at the conglomerate level, including managing target capital ratios."

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