South Korean banks will need to boost risk tolerance levels to comply with Basel III rules
Proceedings report from The Asian Banker’s "The Korea Banking Risk Dialogue 2012" on South Korean banks' exposure to international funding and the domestic OTC derivatives market. January 18, 2013 | Baron Laudermilk* The following is an extract of an important seven-page proceedings report on South Korean banks' risk tolerance levels. The entire report can be downloaded at the bottom of this page in two versions, English and Korean. South Korean banks’ risk managers are facing three main risk and regulatory issues - a) The three main rating agencies (Moody’s, Standard & Poor’s and Fitch Group) have boosted the credit ratings of South Korea - this has allowed a surge of foreign currencies into the economy, leading to new restrictions placed by national regulations, and thus complicating the derivatives markets. b) Impending Basel III capital and liquidity requirements have caused South Korean banks to be more conservative in their lending, not because of the capital requirements as much as the slowing economy. c) Capital and lending developments have major impacts on counterparty risk such as forcing banks to improve their risk governance increase their stress testing. The global economy is at its worst since the Great Depression with growth figures of developing countries (e.g. China and India) in Asia starting from 7.2% in 2011 and falling to 6.1% in 2012 and then estimated to stay at a low in 2013. The South Korean won has become the best performing currency in Asia since June 30 2012, rising about 9% against the US dollar over the past six months. The expensive exports have thus contributed to the country's weak growth, which in turn tempered the inflation level that is forecasted to be at 4.2% in 2012 and 2013 across Asia. Development of regulations in advanced economics and heightened global uncertainties could prompt volatile capital flows. Furthermore, with liquidity drying up in the financial industry, the dampened ability to borrow and grow will adversely impact all corporates. However, East Asia is still growing steadily, with opportunities for growth and expansion. Across Asia, in countrie... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Basel III, Credit Risk, Markets & Exchanges, Operational Risk, Regulation, Risk and Regulation, Trading & Databasel III,Credit Risk,Markets Exchanges,Oprisk,riskregulation,Risk and Regulation,Trading & Data, Basel III,Credit Risk,Markets & Exchanges,Operational Risk,Regulation,Risk and Regulation,Trading & Data, Keywords:Counterparty Risk, Market Risk, G-SIFIs, FATCA, Volcker Rule, ERM Systems Counterparty Risk, Market Risk, G-SIFIs, FATCA, Volcker Rule, ERM Systems
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