Five Major Financial Groups and Banks Designated as 'Systemically Important Banks' for Next Year

10 Companies Selected Again as D-SIBs and D-SIFIs This Year

On July 31, the Financial Services Commission announced that it has designated a total of 10 companies, including Shinhan, KB, Hana, Woori, and NongHyup Financial Group and their subsidiary banks, as systemically important banks and banking holding companies (D-SIBs), as well as domestically systemically important financial institutions (D-SIFIs), for the year 2027.

To select the D-SIBs and D-SIFIs, the Financial Services Commission evaluated domestic banks, foreign bank branches in Korea, and bank holding companies across five categories and 12 assessment indicators, such as scale, interconnectivity, and substitutability, assessing their impact on the financial system.

The evaluation showed that the five major financial groups, their subsidiary banks, Korea Development Bank, and IBK Industrial Bank’s scores were all above the D-SIB selection threshold of 600 basis points (1bp = 0.01 percentage point). However, Korea Development Bank and IBK Industrial Bank were excluded from the designation, considering that they are public institutions in which the government holds shares and government loss compensation provisions apply under the law.

The D-SIB system was recommended by the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) to minimize the shock to the financial system and economy that may be caused by the insolvency of large financial companies. In Korea, D-SIBs have been designated annually since 2016, and the selected banks and bank holding companies are subject to additional capital requirements. The additional capital ratio was gradually increased from 0.25% in 2016 to 1.0% from 2019 onward.

Since 2021, the Financial Services Commission has also designated banks and bank holding companies selected as D-SIBs as D-SIFIs under the Act on the Structural Improvement of the Financial Industry (the “FIA”), requiring them to establish internal recovery plans and resolution plans.

With this designation, the 10 financial holding companies and banks selected as D-SIBs will be required to accumulate an additional 1% in capital during 2027. However, since the results of this year's designation are the same as last year, there is not expected to be a real increase in capital burden.

The Financial Services Commission will notify the 10 companies selected as D-SIFIs of the results and require them to submit their own recovery plans. Financial companies designated as D-SIFIs must submit their internal recovery plans to the Financial Supervisory Service within three months from the date of notification.

This content was produced with the assistance of AI translation services.