Domestic Banks' BIS Ratio Rises in Q1... Impact of Capital Expansion

In the first quarter of this year, capital expansion through net profit realization led to an increase in the Basel Committee on Banking Supervision (BIS) capital ratios, which are key soundness indicators for domestic banks.

According to the 'Status of Bank Holding Companies and Banks' BIS Capital Ratios as of the End of March (Provisional)' data released by the Financial Supervisory Service (FSS) on the 1st, the total capital ratio of domestic banks as of the end of March stood at 15.58%, up 0.29 percentage points from the end of December last year.

The common equity tier 1 capital ratio was 12.88%, and the tier 1 capital ratio was 14.24%, rising 0.28 percentage points and 0.33 percentage points respectively during the same period. The simple tier 1 capital ratio increased by 0.31 percentage points from the end of December last year to 6.51%.

The BIS capital ratio is the ratio of a bank's capital to its total assets (risk-weighted assets) and is considered a key indicator of a bank's financial soundness. The regulatory standards set by supervisory authorities are 7.0% for the common equity tier 1 capital ratio, 8.5% for the tier 1 capital ratio, and 10.5% for the total capital ratio. Domestic systemically important banks (D-SIBs) are subject to an additional 1 percentage point requirement on the total capital ratio.

The FSS explained, "The increase in domestic banks' capital ratios is due to a significant rise in capital from net profit realization, capital increases, and issuance of innovative capital securities, while risk-weighted assets only slightly increased due to the application of the final Basel III framework."

Looking at total capital ratios by bank, KakaoBank had the highest at 35.26%, followed by the foreign bank Korea Citibank at 27.15%. Among the five major financial holding companies, the ratios were highest in the order of KB Kookmin (16.84%), NongHyup (15.97%), Shinhan (15.81%), Woori (15.79%), and Hana (15.31%).

The FSS stated, "The capital ratios of domestic banks rose compared to the previous quarter-end, and all banks maintained levels above regulatory requirements, indicating a sound condition. We plan to encourage the expansion of loss-absorbing capacity so that banks can maintain soundness and faithfully perform their core roles amid domestic and external shocks."