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Banks' average capital adequacy ratio falls in Q2

Earnings 12:00 September 07, 2022

SEOUL, Sept. 7 (Yonhap) -- South Korean banks saw their financial health weaken in the second quarter from three months earlier due mainly to an increase in corporate debt, data showed Wednesday.

According to the data from the Financial Supervisory Service (FSS), the average capital adequacy ratio of 17 commercial and state-run banks had stood at 13.94 percent as of end-June, down 0.28 percentage point from three months ago.

The ratio is a key gauge of financial soundness by measuring the proportion of a bank's capital against its risk-weighted assets.

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

The on-quarter decline came amid the central bank's aggressive rate hikes that raised companies' borrowing costs and slashed the value of corporate bonds, the FSS stated.

According to the regulator's data, local banks' corporate lending jumped 31.5 trillion won in the second quarter this year, up from a 29.4 trillion-won increase from a quarter ago.

The FSS said the local banks' capital adequacy remains solid despite the on-quarter slide, all above the BIS' regulation standards.

Among the 17 lenders, Toss Bank, the new internet-only lender, is exempt from the BIS' average capital adequacy requirements until 2023.

This undated file photo shows ATM machines of several first-tier banks operating in South Korea. (Yonhap)


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