"Supporting Advanced Industries"... Ruling Party Proposes Amendment to Expand KDB Statutory Capital

Park Sanghyuk of Democratic Party Proposes KDB Act Amendment
90% of Statutory Capital Depleted
Urgent Need to Establish Advanced Strategic Industry Fund

The ruling Democratic Party of Korea has proposed an amendment to the Korea Development Bank Act to raise the statutory capital ceiling for the Korea Development Bank (KDB) from the current 30 trillion won to 45 trillion won. If the related bill passes, KDB is expected to have greater capacity to support advanced strategic industries such as artificial intelligence (AI), semiconductors, and batteries.

According to the National Assembly on July 17, Democratic Party lawmaker Park Sanghyuk formally proposed the amendment to the KDB Act the previous day. The statutory capital refers to the maximum capital KDB can hold. The actual capital is determined by government capital injections and other means.

KDB’s statutory capital has increased from 1 trillion won in 1981, to 5 trillion won in 1995, 10 trillion won in 1998, 20 trillion won in 2009, and 30 trillion won in 2014. As of the end of last month, KDB’s capital stood at 27 trillion won, meaning it has used up 90% of its statutory capital.

KDB plans to aggressively expand loans and investments by establishing a fund for advanced strategic industries. However, as risk-weighted assets such as corporate loans increase, this puts pressure on KDB’s financial soundness.

KDB’s Bank for International Settlements (BIS) total capital ratio stood at 14.13% in the first quarter, the lowest among domestic banks. To improve this, KDB needs to increase its capital. However, since the current capital is already near the statutory ceiling, it is difficult to raise additional capital.

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