Bank of Korea — Best Systemic and Prudential Regulator in Asia Pacific

The Bank of Korea (BoK) has served as a reliable steward overseeing the stability and soundness of the financial system in South Korea. The country’s financial system has remained stable, supported by the resilience of its institutions and favourable economic conditions in the country.

Commercial banks’ capital adequacy ratio stood at 18%, and common equity Tier 1 capital ratio at 15% at the end of the third quarter of 2023. This is significantly above the supervisory minimum standards of 10.5% for all banks. 

At the end of the third quarter of 2023, commercial banks’ leverage ratio stood at 5.8%, well above the regulatory minimum requirement of 3%. The liquidity coverage ratio stood at 111% in October 2023. 

During the year, the BoK led the key risk assessment of banks and non-bank deposit-taking institutions (NBDIs) to examine the structural characteristics of funding and operations before and after the recent period of interest rate hikes. By the end of the third quarter of 2023, banks had adequately set aside loan loss provisions and loan loss reserves. However, the volume of substandard-or-below loans for NBDIs exceeded loan loss provisions. NBDIs are assessed to require a further reinforcement of loss absorption capacities.

The BoK also raised the countercyclical capital buffer requirement for banks and bank holding groups from 0% to 1% of total risk-weighted assets, effective May 2024, to strengthen the management of systemic vulnerabilities. 

For its effective oversight of the financial system, robust risk assessment practices, and proactive measures to strengthen resilience and manage systemic vulnerabilities, the award for Best Systemic and Prudential Regulator in Asia Pacific goes to Bank of Korea.