By Kang Seung-woo
Korean banks’ capital adequacy ratio crept down in the fourth quarter of last year from the previous quarter due to payouts of year-end stock dividends, the financial watchdog said Wednesday.
According to the Financial Supervisory Service (FSS), 18 lenders’ average Bank of International Settlements (BIS) ratio registered 14.6 percent as of the end of December, down from 14.62 percent in the third quarter of 2010.
The banks’ capital adequacy ratio, which dipped to 10.87 percent in September 2008, reached a record high of 14.7 percent in March last year. 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.
The FSS noted that the decline in the capital adequacy rate came as lenders tapped their capital holdings in the October-December period to pay out dividends to shareholders.
Among the nation’s top four banks, Hana Bank suffered the sharpest drop of 1.69 percentage points to 14.04 percent after paying out stock dividends of 1.9 trillion won, while Shinhan Bank also shed 0.33 percentage points to 15.93 percent during the cited period.
Woori Bank managed to advance 0.05 percentage points to 14.65 percent and Kookmin Bank remained unchanged at 13.44 percent.
Smaller firms compiled much more impressive numbers.
The Korea Development Bank (KDB), Citibank Korea, Korea Exchange Bank (KEB) and National Agricultural Cooperative Federation, or Nonghyup, eclipsed the 16 percent level in the capital adequacy ratio.
The FSS added that their BIS ratio saw an increase of 0.23 percentage points from a year ago.
As for the Tier I capital ratio, a barometer of core capital, it also shed 0.12 percentage points quarter-on-quarter to 11.63 percent as of the end of December, it said.
“The FSS will direct banks to deal with future changes in the regulatory environment and the market including the new Basel III standard, scheduled to be enforced from Jan. 1, 2013, in a preemptive manner and to keep adequate levels of capital in the long term,” said an official of the financial watchdog.
Meanwhile, the BIS ratio of seven bank holding firms rose 0.13 percentage points quarter-on-quarter to reach 13.52 percent at the end of 2010.
The growth in the ratio is attributable to improved net interest margins, and a decrease in their risk-weighted assets and foreign currency-denominated loans.
Hana Financial Group posted an increase of 0.57 percentage points to 12.38 percent and Woori Financial also gained 0.12 percentage points to 12.53 percent.
But Shinhan and KB lost 0.26 percentage points and 0.03 percentage points respectively.
The FSS said it will conduct thorough supervision of the firms’ financial health so that they don’t compromise their soundness due to their ongoing race for mergers and acquisitions and loan asset growth.