Local banks' financial health improves in Q1

By Kim Soo-yeon
SEOUL, June 9 (Yonhap) -- The financial health of South Korean banks improved in
the first quarter from three months earlier as local lenders made efforts to
boost their capital base through share and bond sales, the nation's financial
watchdog said Tuesday.
The average capital adequacy ratio of 18 commercial and state banks came in at
12.94 percent as of the end of March, up 0.63 percentage point from three months
earlier, according to the Financial Supervisory Service (FSS).
The ratio, a key barometer of financial soundness, measures the percentage of a
bank's capital to its risk-weighted credit.
"Local banks' capital increased as they continued to boost their capital cushion
by issuing shares and bonds and posted net income," the FSS said.
The lenders' tier one ratio, a barometer of core capital, reached 9.51 percent as
of end-March, up 0.67 percentage point from the previous quarter, it added.
According to the watchdog, banks raised a combined 7.5 trillion won (US$6
billion) in capital by selling shares or hybrid bonds in the first quarter. The
figures include 4 trillion won raised through tapping a bank recapitalization
fund, it added.
Local banks have been seeking to bolster their falling capital adequacy ratios as
the slowing economy and a credit crunch are jacking up problem loans.
In March, the government launched a 20 trillion won bank recapitalization fund to
bolster their capital base and encourage risk-averse lenders to expand loans.
The watchdog said local banks have the capacity to absorb a possible fall in the
capital adequacy ratio and that it will continue to closely monitor local banks'
financial health and urge them to clear bad debt as early as possible.
The FSS said in late May that South Korea lowered its minimum capital adequacy
ratio guideline to 10 percent from 12 percent in an effort to spur lending.
sooyeon@yna.co.kr
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