The capital ratio of Korean banks, a key indicator of financial health, increased in the second quarter. This rise is attributed to net income and capital increases from equity offerings, which outpaced the growth in risk-weighted assets.
According to the Financial Supervisory Service's report on the 'Status of Bank Holding Companies and Banks' BIS Capital Ratios as of June,' the total capital ratio for domestic banks stood at 15.77% at the end of June, up 0.03 percentage points from the first quarter's 15.74%.
The common equity tier 1 ratio rose to 13.62%, an increase of 0.12 percentage points from the previous quarter, while the total capital ratio increased by 0.08 percentage points to 14.84% during the same period.
The rise in the capital ratio was influenced by a 2.2% increase in common equity, amounting to 8.8 trillion won, which exceeded the 1.7% growth in risk-weighted assets, totaling 42.6 trillion won.
The BIS capital ratio measures the proportion of a bank's capital to its total assets (weighted for risk) and serves as a critical indicator of a bank's financial structure.
As of the end of June, all domestic banks exceeded regulatory capital ratio requirements. The regulatory minimums are 8.0% for the common equity tier 1 ratio, 9.5% for the tier 1 capital ratio, and 11.5% for the total capital ratio. Systemically important banks (D-SIBs) are subject to 1 percentage point higher standards.
In terms of total capital ratio, Woori, NongHyup, Citibank, SC, K, Kakao, Toss, Suhyup, and Export-Import Bank all reported ratios exceeding 16.0%, while BNK showed a relatively lower level below 14%.
For the common equity tier 1 ratio, Citibank, SC, K, Kakao, Toss, Suhyup, and Export-Import Bank all exceeded 14%, while KB, Shinhan, Hana, Woori, and Industrial Bank reported ratios above 13%.
Ten banks, including NongHyup (+0.94 percentage points), SC (+0.78 percentage points), iM (+0.25 percentage points), Citibank (+0.16 percentage points), and Shinhan (+0.13 percentage points), saw increases in their common equity tier 1 ratios compared to the previous quarter. NongHyup's capital ratio increase was particularly significant due to its equity offering.
Conversely, seven banks, including K (-1.39 percentage points), Export-Import Bank (-0.22 percentage points), Suhyup (-0.20 percentage points), and BNK (-0.15 percentage points), experienced declines in their common equity tier 1 ratios.
The Financial Supervisory Service noted that while the capital ratios of domestic banks remain at a generally healthy level, ongoing uncertainties from the prolonged situation in the Middle East and changes in economic conditions, such as interest rate hikes, could increase credit risk.
The agency stated, "We will encourage domestic banks to enhance their loss absorption capacity and manage capital adequacy to maintain stable financial health while fulfilling their role as financial intermediaries."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.