The national regulator has given banks more leeway to manage a volatile credit market. Barbara Pianese reports.

South Korea’s credit market is stabilising after suffering its worst slump since the global financial crisis. 

The country’s credit market experienced a credit crunch after the developer of the Legoland Korea theme park defaulted on its debt in October. 

The government responded to the resulting market turmoil by reactivating a support mechanism, while major banks committed to funds to support the short-term money market. 

Meanwhile, South Korean banks have six more months to improve their short-term resilience to liquidity shocks, while the nation's financial regulators focus on injecting more money into the market to alleviate the credit crunch.

The Financial Services Commission delayed the deadline to meet the higher requirement by six months to mid-2023. The new minimum liquidity coverage ratio (LCR) will be pushed to 95%, up from 92.5%. The regulator opted to give banks greater room to manage enhanced volatility and uncertainties in the current situation. 

BNK Financial Group and NongHyup Financial Group, two of the biggest lenders in the country, both met the requirement at the end of 2021. Hana Financial Group’s LCR stood at 107.65% in 2017, but slumped in the past couple of years, falling to 89.66% at the end of last year. 

However, three of the seven largest banks in the country might have failed to meet the new minimum LCR had the regulator had not delayed the deadline, according to S&P.


All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker

For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Request a demonstration to The Banker Database

Join our community

The Banker on Twitter