Selection of the 5 Major Financial Holding Companies and 5 Major Commercial Banks
The five major domestic financial holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup) and the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) have been reselected as Domestic Systemically Important Banks and Bank Holding Companies (D-SIBs) and Domestic Systemically Important Financial Institutions (D-SIFIs) for the 2025 financial system.
On the 10th, the Financial Services Commission held a regular meeting and announced that 10 banks and bank holding companies, including KB Financial Group, were selected as D-SIBs and D-SIFIs for 2025. This is the same result as last year, when the same 10 banks and bank holding companies were designated as D-SIBs and D-SIFIs.
The D-SIB system is a framework recommended by the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) to strengthen supervision of large financial companies in order to minimize the impact of their insolvency on the financial system and the economy. In Korea, it has been selected annually since 2016, and banks and bank holding companies selected are required to accumulate additional capital reserves (currently 1.0%).
Since 2021, when selected as systemically important banks and bank holding companies, the authorities have also designated them as D-SIFIs under the Act on the Structural Improvement of the Financial Industry, applying self-normalization and resolution planning systems.
To select D-SIBs, the authorities evaluated the impact on the financial system (systemic importance) by measuring five categories and 12 evaluation indicators, including size, interconnectedness, and substitutability, targeting domestic banks, foreign bank branches, and bank holding companies.
The evaluation results showed that the five major bank holding companies and banks exceeded the minimum selection threshold for D-SIBs (600 basis points). Accordingly, the authorities selected the five major bank holding companies and banks as D-SIBs and D-SIFIs. Although the Korea Development Bank and the Industrial Bank of Korea also exceeded the minimum threshold, they were excluded from selection considering that they are public institutions with government shareholding and legal provisions for government loss compensation.
The 10 banks and bank holding companies selected as D-SIBs will be required to accumulate an additional 1% capital reserve during next year. However, since the selection results are the same as the previous year, it is expected that there will be no actual capital accumulation burden arising from this D-SIB selection. As of the end of last year, the capital ratios of the 10 banks and bank holding companies already exceed the minimum required capital level for next year. In addition, those also selected as D-SIFIs must submit a self-normalization plan to the Financial Supervisory Service within three months from the date of notification.
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