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Regulator confident Korean banks can meet new Basel rules
Writer : Sender
Jul 28, 2010
The financial regulator said Tuesday Korean banks will not be much affected by a set of new international bank rules drafted by the Basel Committee over the weekend.
With their relatively sound financial structure, local banks will be able to meet the revised capital and liquidity requirements, the Financial Supervisory Commission said.
"The tier-one capital ratio and leverage ratio of Korean banks are relatively healthier than the average in advanced economies. Banks here won't have trouble meeting the capital rules which are softened from the proposal made months back," an FSS official told The Korea Herald.
Tier-one capital ratio represents core capital including retained earnings and common stock, which regulators use to measure the financial strength of banks. As of March this year, it stood at 11.39 percent for banks here. European regulators recently used a six percent threshold for tier-one capital ratio bank stress tests.
"The industry has experienced and seen the credit crunch from the past crisis, so we're also confident local banks can meet the new liquidity rules with an improved risk management system," he said.
In adjusting the liquidity coverage ratio, or portions of assets that can be converted to cash during a crisis, the committee lowered the share of movable deposits from the 7.5-15 percent range to the 5-10 percent range.
The much softened agreement from the original draft made by the Bank of International Settlement allowed certain assets, including minority stakes in other financial firms, to count as capital. The content will be finalized at the G20 Seoul Summit in November.
G20 leaders asked the Basel committee to draft reforms of banking rules after the recent financial crisis. The committee, representing central banks and regulators in 27 nations, was lobbied hard by banks all over the world which led the group to compromise on capital rules, allowing banks to count deferred tax assets, mortgage servicing rights and part of its stake in another financial firm as capital up to a limit.
The Switzerland based group agreed on a leverage ratio to apply to banks globally, with the deadline for bindings set at 2018.
(Source: The Korea Herald)
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