Banks seek to increase capital by 16.6 tln won by year-end

SEOUL, Dec. 28 (Yonhap) -- South Korean banks are seeking to increase their
capital base by a combined 16.6 trillion won (US$12.7 billion) by the end of this
year to bolster the falling capital adequacy ratio, the financial watchdog said
Sunday.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.86 percent as of the end of September, down 0.5 percentage point from three
months earlier, according to the Financial Supervisory Service (FSS).
Their average tier-one capital ratio, a barometer of a bank's core financial
health, reached 8.33 percent as of the end of September, down 0.21 percentage
point from a quarter earlier, it added.
"Domestic lenders have completed raising capital by 14.3 trillion won so far by
selling new shares and subordinated bonds," the FSS said in a statement. "By the
end of this year, local banks will seek to raise the remainder by selling shares
or hybrid bonds."
South Korean lenders are struggling to jack up their declining capital adequacy
ratio, a key barometer of financial soundness that measures the percentage of a
bank's capital to its risk-weighted credit.
According to the FSS, if local banks can increase their capital base as planned,
their average capital adequacy ratio will add 1.38 percentage points.
To give a boost to local banks' efforts, the government is seeking to set up a 20
trillion won fund in January to be used to buy preferred stocks, subordinated
bonds and hybrid debt sold by lenders. Local banks are to tap the fund on a
voluntary basis.
Last week, the FSS said it will allow lenders to issue hybrid bonds worth up to
30 percent of their tier-one capital from the current 15 percent. Hybrid bonds
are securities that combine the properties of debt and equity.
"Earlier next year, domestic banks are also planning to bolster their capital
base by around 3.1 trillion won," the FSS added.
sooyeon@yna.co.kr
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