Watchdog mulling measures for boosting bank capital

SEOUL, Dec. 2 (Yonhap) -- South Korea's financial watchdog said Wednesday it
plans to consider more measures for local banks to strengthen their financial
health in a bid to brace for possible financial turmoil.
The Financial Supervisory Service (FSS) said it is considering introducing
measures that include the issuance of bonds or insurance schemes through which
local financial firms' capital could be bolstered while facing the financial
crisis. The FSS is drawing up a report on regulatory tasks covering such issues.
The watchdog said it may allow local banks to sell reverse convertible bonds as
one such step to help them easily beef up their capital buffers.
If a bank's capital adequacy ratio falls below a certain level by selling reverse
convertible bonds, the securities could be converted into stocks, raising its
capital base. The ratio, a key barometer of financial soundness, measures the
percentage of a bank's capital to its risk-weighted assets.
The possible moves came as Korean banks were seeking to bolster their capital
because the slowing economy and a credit crunch has jacked up problem loans.
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 FSS.
sooyeon@yna.co.kr
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