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Banks' average capital adequacy ratio rises in Q2

Bank automated teller machines at a building in Seoul (Yonhap)
Bank automated teller machines at a building in Seoul (Yonhap)
South Korean banks saw their financial health improve in the second quarter from three months earlier as they reported high net profits and raised capital amid the COVID-19 pandemic, data showed Wednesday.

The average capital adequacy ratio of 16 commercial and state-run banks stood at 15.65 percent as of end-June, up 0.29 percentage point from the end of March, according to the data from the Financial Supervisory Service (FSS).

A key barometer of financial soundness, the ratio measures the proportion of a bank's capital to its risk-weighted assets.

The rise came as their risky loans expanded at a slower pace than their total capital, which includes net profits.

The FSS said most lenders had higher capital adequacy ratios than the international standard, despite a steady rise in lending stemming from the coronavirus outbreak.

The Switzerland-based Bank for International Settlements (BIS), an international organization of central banks, advises lenders to maintain a ratio of 8 percent or higher.

At the end of June, KB Kookmin, Hana, Shinhan and other major lenders boasted stable capital adequacy ratios of 15-18 percent.

The figure for two state banks -- the Korea Development Bank and the Export-Import Bank of Korea -- came to 15.89 percent and 16.12 percent, respectively. (Yonhap)