By Kang Seung-woo
Standard Charted (SC) First Bank, the Korea Exchange Bank (KEB) and Citibank Korea posted the steepest increases in their Bank for International Settlements (BIS) ratio during the third quarter.
The Financial Supervisory Service (FSS) announced Friday that SC First’s capital adequacy ratio gained 0.64 percentage points from three months earlier, KEB added 0.63 percentage points and Citi climbed 0.62 percentage points, while the average ratio of 18 banks logged 14.62 percent as of the end of September, up 0.33 percentage points from the preceding quarter, according to the financial watchdog.
The banks’ capital adequacy ratio, which dipped to 10.87 percent in September 2008, reached a record high of 14.70 percent in March this year, but it sank in the second quarter, ending a streak of six consecutive quarters of improvement.
The BIS ratio measures the financial soundness of a bank by comparing its capital with risky assets with a ratio above 10 percent evaluated to be sound.
Among the nation’s top four banks, Kookmin and Hana advanced 0.43 percentage points and 0.40 percentage points, respectively, while Woori Bank managed to gain 0.03 of a percentage point. Shinhan Bank turned in a 0.11 increase during the cited period.
Provincial lenders compiled much more impressive numbers.
Daegu Bank came up with a gain of 1.22 percentage points and Kyongnam also posted an almost 1 percentage point increase, but Jeonbuk was the only institution among 18 to suffer a drop of 1.31 percentage points.
The FSS said that their equity capital, which grew amid a decrease in risk-weighted assets, paved the way for a further improvement in BIS ratio.
In the third quarter of the year, banks’ equity capital rose 0.8 percent, or 1.2 trillion won ($1.05 billion), from three months ago. Their risk-weighted assets dropped 1.5 percent, or 16.4 trillion won, as the local currency’s ascent to the dollar drove down the conversion value of foreign currency-denominated loans and derivatives, the FSS said.
It added that the lenders’ tier-one ratio, a barometer of core capital, reached an all-time high of 11.75 percent, up from 11.33 percent in the previous quarter.
Market watchers expect to see banks post a solid BIS ratio for the time being.
“The ratio will not dip in the fourth quarter and next year because capital assets are on a rise, while risk-weighted assets including loans are likely to decline,” Choi Jung-wook, an analyst at Daishin Securities, told The Korea Times.
The FSS is expected to encourage banks to keep their high BIS ratio.
“The global financial crisis is still lingering and their business conditions are expected to get tougher due to potential tighter measures by the Basel Committee on Banking Supervision (BCBS), so we will try to have the banks maintain their capital adequacy level,” an FSS official said.
Meanwhile, the BIS ratio of the banking holding firms increased by 0.13 percentage points to 13.39 percent in the same period, helped by their banking units’ soaring financial health.
KDB Financial Group logged 16.73 percent, while SC and KB sat at 13.14 percent and 13.11 percent respectively.