S. Korean banks see better financial soundness in Q3

SEOUL, Nov. 25 (Yonhap) -- The financial health of South Korean banks improved in
the third quarter as they made efforts to boost capital and earned more income,
the financial watchdog said Wednesday.

The average capital adequacy ratio of 18 commercial and state banks came in at
14.07 percent as of the end of September, up 0.33 percentage point from three
months earlier, according to the Financial Supervisory Service (FSS).
The ratio, a key barometer of financial soundness, measures the percentage of a
bank's capital to its risk-weighted assets.
"Banks' equity capital increased on rising net income while their risk-weighted
assets declined as the won's strength to the dollar reduced the value of
derivatives and the portion of foreign currency denominated assets," the FSS said
in a statement.
The lenders' tier one ratio, a barometer of core capital, reached 10.67 percent
as of end-September, up from 10.3 percent from the previous quarter, it added.
Korean banks sought to bolster their capital adequacy ratio as the slowing
economy and a credit crunch jacked up problem loans.
Local banks have to cut their non-performing loan ratio to around 1 percent by
the end of this year, which would prompt them to write down or sell the huge
amount of bad debts.
"Korean banks' capacity to absorb losses have improved significantly. The
watchdog plans to continue to encourage them to maintain their financial health,
given that plans to introduce new equity capital standards are being reviewed at
a global level.
sooyeon@yna.co.kr
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