G-20 countries to ease capital adequacy ratio in London meeting: official

SEOUL, March 10 (Yonhap) -- The Group of 20 advanced and developing countries will agree "in principle" to ease capital adequacy ratio requirements for their banks to help counter worsening worldwide recession, a Seoul official said Tuesday.

"G-20 member countries are expected to reach an agreement in principle to adopt a
flexible capital adequacy ratio enforced by the Bank for International
Settlements (BIS)," Deputy Finance Minister Shin Je-yoon told reporters.
"They shared the idea in general to adopt two different BIS ratios," he added,
saying that the rates could be 8 percent when the economy is in recession and 12
percent when it is prosperous.
Shin will accompany Finance Minister Yoon Jeung-hyun to the G-20 meeting of
finance ministers and central bank chiefs to be held in London on Sunday. They
will discuss the issue and others linked to the global economy and financial
markets.
"I believe a consensus will be formed in the meeting," he added. "But how we draw
the line between recession and prosperity has not been determined, and it will be
discussed later," Shin said.
The BIS ratio is a key barometer of financial soundness that measures the
percentage of a bank's capital to its risk-weighted credit. Lenders are advised
to maintain the ratio at 8 percent or higher.
Some experts point out that the currently rigorous capital standard is causing
banks to be reluctant to make loans to financially strapped small- and
medium-sized companies for fear of declining BIS ratios.
In November, South Korean President Lee Myung-bak called for easing the capital
requirement, saying the rigorous standard it imposes on banks is aggravating the
credit crunch in emerging economies.
Shin said that such a flexible ratio application will encourage banks to continue
lending, even when the economy is in a protracted downturn, and help speed its
turnaround.
kokobj@yna.co.kr
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