Korean Banks Opt to Adopt Basel III Credit Risk Framework Early

Source: Regulation Asia Editors, Regulation Asia 2020-06-30

Fifteen banks and eight bank holding companies opted to adopt the Basel III credit risk framework early as it will boost their capital adequacy ratios.

South Korean authorities have announced that fifteen banks and eight bank holding companies will begin to gradually implement the Basel III credit risk framework from the end of June 2020.

The FSC (Financial Services Commission) and FSS (Financial Supervisory Service) first announced plans to adopt the credit risk framework early in March, while pushing forward the adoption of other Basel III rules to 1 January 2023.

The banks and bank holding companies were asked to notify authorities by end-May of their preferred date to begin the implementation. All applied to implement the rules early, and will be allowed to do so.

The early implementation of the Basel III credit risk framework is expected to boost the capital adequacy ratios of domestic banks and bank holding companies, effectively helping to make available more funding sources to finance and support the real economy.

The Basel III measures will lower credit risk weights for SME loans from 100% to 85%, and loss given default (LGD) rates for business loans from 45% to 40% for unsecured loans and from 35% to 20% for real estate collateral loans.

JB Financial Group, Kwangju Bank and Jeonbuk Bank will be the first to go live with implementation at the end of this month.

Financial groups Shinhan, Woori, KB, DGB, BNK and NH, and banks Shinhan Bank, Woori Bank, KB Kookmin Bank, DGB Daegu Bank, Busan Bank, Jeju Bank, BNK Kyongnam Bank, NH Bank and SH Bank will go-live by end-September.

Korea Development Bank, Industrial Bank of Korea will go-live by end-December; Hana Financial Group and KEB Hana Bank by end-March 2021; and Korea Eximbank by end-June 2021.

Standard Chartered Korea, Kakao Bank and K Bank will begin to implement the Basel III credit risk framework beginning in January 2023.

Korean Banks Opt to Adopt Basel III Credit Risk Framework Early

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