Five Major Banks and Financial Holdings Selected as Systemically Important Banks... Obligation to Accumulate Additional Capital

[Asia Economy Reporter Kangwook Cho] Shinhan Financial Group, KB Financial Group, Woori Financial Group, Hana Financial Group, NongHyup Financial Group, and their affiliated banks?Shinhan, Kookmin, Woori, Hana, and NongHyup?have been selected as Domestic Systemically Important Banks and Bank Holding Companies (D-SIB) for 2021. These financial institutions will be required to accumulate an additional 1 percentage point of capital next year.

The Financial Services Commission announced on the 24th, during a regular meeting, that 10 banks and bank holding companies were selected as D-SIBs.

Compared to last year, Jeju Bank, a subsidiary of Shinhan Financial Group, was excluded. This measure follows the 'Financial Regulation Flexibility Plan' implemented in response to the COVID-19 pandemic, which exempts small regional banks from being designated as systemically important banks and from the additional capital accumulation requirement (1 percentage point).

However, including the 10 selected based on systemic importance evaluation, the Industrial Bank of Korea and the Small and Medium Business Bank also exceeded the selection criteria but were excluded from the D-SIB list. The Financial Services Commission explained that this was due to these being public institutions in which the government holds shares and the existence of legal provisions for government loss compensation.

The Basel Committee on Banking Supervision (BCBS) has been strengthening supervision over large banks and bank holding companies since the 2008 global financial crisis to address systemic risks posed by large financial institutions. Each country also selects its own Domestic Systemically Important Banks (D-SIB) and recommends additional capital accumulation for these banks and bank holding companies.

Following the Basel Committee's recommendations, the Financial Services Commission has been selecting D-SIBs and imposing additional capital accumulation requirements since 2016.