Domestic Banks' BIS Capital Ratio Declines in Q3 Amid Loan Growth

In the third quarter of this year, the BIS (Bank for International Settlements) capital ratios of domestic banks declined.

According to the 'Status of Bank Holding Companies and Banks' BIS Capital Ratios' data released by the Financial Supervisory Service on the 5th, the BIS total capital ratio of domestic banks at the end of September was 15.56%, down 0.15 percentage points compared to the end of June.

The common equity tier 1 capital ratio was 12.99%, and the tier 1 capital ratio was 14.26%, each decreasing by 0.07 percentage points and 0.10 percentage points, respectively.

The BIS capital ratio is the ratio of a bank's capital to its total assets (risk-weighted assets) and is considered a key indicator of the bank's financial soundness.

The regulatory standards set by the supervisory authorities are 7.0% for the common equity tier 1 capital ratio, 8.5% for the tier 1 capital ratio, and 10.5% for the total capital ratio.

The Financial Supervisory Service explained, "Although capital increased due to quarterly net income, the relatively larger increase in risk-weighted assets caused by loan growth was the reason."

Six banks (K-Bank, Suhyup, SC Jeil, BNK, Nonghyup, Hana) whose total capital growth rate exceeded the increase in risk-weighted assets or whose risk-weighted assets decreased saw their total capital ratios rise compared to the previous quarter.

Eleven banks (Kakao, Toss, Shinhan, Industrial, DGB, Export-Import, KB, Citi, JB, Industrial Bank, Woori) with slight decreases in total capital or relatively larger increases in risk-weighted assets experienced declines in their total capital ratios.

The Financial Supervisory Service stated, "As of the end of September, domestic banks' capital ratios remained at a healthy level, exceeding regulatory requirements."

It added, "Despite domestic and international economic uncertainties, we plan to strengthen capital adequacy supervision to ensure banks secure sufficient loss absorption capacity and maintain their fund intermediation functions. We will continuously monitor to prevent increases in borrowers' credit risk from leading to bank insolvency or systemic crises. Additionally, we will guide banks to adequately prepare for the imposition of countercyclical capital buffer requirements and the introduction of stress buffer capital systems to ensure sufficient capital capacity."

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

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