South Korea is mulling whether to require banks to hold more capital, as officials seek safeguard the financial system in the face an increase in interest rates and delinquencies.
(Bloomberg) — South Korea is mulling whether to require banks to hold more capital, as officials seek safeguard the financial system in the face an increase in interest rates and delinquencies.
The country is “actively considering” increasing its countercyclical capital buffer this year as well as introducing a system imposing additional capital on banks based on the results of stress tests, the Financial Services Commission said in a statement Thursday. The regulator cited increased uncertainties due to sharp rise in interest rates and the exchange rate. Household debt delinquencies were rising, it said.
Introduced in 2016, South Korea’s countercyclical capital buffer is currently set at 0%.
“Capital adequacy is relatively insufficient, and the possibility of a future capital ratio decline is increasing due to recent moves to increase dividends,” it said. Plans are due to be drawn up in the first half of the year, with implementation in the second half.
Global financial markets in turmoil, are prompting concerns about banks’ capital adequacy, with Credit Suisse’s stocks and bonds cratering. That, coupled with the collapse of regional banks in the US, fueled broader concern about the outlook for the banking system.
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