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S. Korean banks' average capital adequacy ratio down in Q2

All News 14:06 August 31, 2020

SEOUL, Aug. 31 (Yonhap) -- South Korean banks saw their financial health worsen slightly in the second quarter from three months earlier due to the impact of the coronavirus outbreak, data showed Monday.

The average capital adequacy ratio of 19 commercial and state-run banks stood at 14.53 percent as of end-June, down 0.19 percentage point from the end of March, according to the data from the Financial Supervisory Service (FSS).

It marks the third straight quarter of decline. Their average capital adequacy ratio fell from 15.4 percent as of September last year to 15.25 percent in December and 14.72 percent as of March this year.

A key barometer of financial soundness, the ratio measures the proportion of a bank's capital to its risk-weighted assets.

The decline came as their risky loans expanded at a faster pace than their total capital, which includes net profits.

Their risk-weighted loans climbed by 67.8 trillion won (US$57.3 billion), or 4.1 percent, over the cited period, while their total capital increased 6.4 trillion won, or 2.8 percent.

S. Korean banks' average capital adequacy ratio down in Q2 - 1

The FSS said most lenders had far higher capital adequacy ratios than the international standard, despite a steady rise in lending stemming from the coronavirus outbreak.

The Switzerland-based Bank for International Settlements (BIS), an international organization of central banks, advises lenders to maintain a ratio of 8 percent or higher.

At the end of June, KB Koomin, Hana, Shinhan and other major lenders boasted stable capital adequacy ratios of 14-15 percent.

The figure for two state banks -- the Korea Development Bank and the Export-Import Bank of Korea -- came to 12.85 percent and 13.45 percent, respectively, because of their higher exposure to coronavirus-hit borrowers.

The ratio for K-Bank, one of the country's two internet-only lenders, stood at 10.2 percent, down 0.94 point from three months earlier.

Meanwhile, the capital adequacy ratio for local bank holding companies averaged 13.68 percent as of end-June, up 0.26 percentage point from the end of March, according to the data.
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