Capital adequacy ratio of 7 major financial conglomerates rises to 177.6% at end of last year

<style ref="s0">The Financial Supervisory Service said Wednesday that the capital adequacy ratio of seven major financial conglomerates — Samsung, Hyundai Motor, Mirae Asset, Hanwha, Kyobo, DB and Daw Kiwoom — stood at 177.6% at the end of last year, up 3.3 percentage points from a year earlier. The figure far exceeds the 100% minimum required under the Financial Conglomerates Supervision Act.</style>

A financial conglomerate, as defined under the act, is a group comprising two or more financial companies within the same corporate group that operates in at least two of the following sectors — banking and deposit-taking, insurance, and financial investment — and meets certain size thresholds, including total assets of 5 trillion won. Such groups must manage risks at the group level in an integrated manner, going beyond supervision of individual financial subsidiaries. The capital adequacy ratio is calculated by dividing integrated equity — the group's actual loss-absorption capacity — by the minimum capital requirement, which accounts for risks at the conglomerate level.

Integrated equity reached 212.5 trillion won ($146.8 billion) at the end of last year, up 41.4 trillion won, or 24.2%, from a year earlier. The increase was driven mainly by higher unrealized gains on equity holdings — recorded as other comprehensive income — amid a buoyant stock market, as well as subordinated bond issuances by insurance affiliates. Integrated required capital rose 21.5 trillion won, or 21.9%, to 119.6 trillion won, reflecting growth in asset size due to higher book values of equity holdings and an increase in total assets at overseas financial subsidiaries.

Among the seven groups, DB posted the highest ratio at 207.9%, followed by Kyobo (201.5%), Samsung (191.2%), Daw Kiwoom (176.7%), Mirae Asset (167.3%), Hanwha (148.6%) and Hyundai Motor (145.5%).

Compared with the end of the previous year, the ratios rose at DB (up 12.9 percentage points), Samsung (up 6.1 percentage points), Mirae Asset (up 3.1 percentage points) and Kyobo (up 0.1 percentage points), while they fell at Daw Kiwoom (down 17.1 percentage points), Hanwha (down 6.3 percentage points) and Hyundai Motor (down 1.4 percentage points). Kyobo's capital adequacy ratio stands at 151% on a basis that excludes transitional measures under the Korean Insurance Capital Standard, known as K-ICS.

The FSS said the capital adequacy ratios of all seven financial conglomerates exceeded the regulatory threshold and that their loss-absorption capacity remained sound. It added that it would "continuously monitor capital adequacy trends in preparation for increased volatility in financial markets, including interest rates and share prices," and would "encourage stronger internal controls and risk management to proactively address group-level risks such as risk contagion and concentration arising from intra-group transactions and co-investments."