Delaying Basel III implementation a boon for Korean banks

It's a missed opportunity for Korea to strengthen its bank regulatory framework, says Moody's.

 Moody's Investors Service says that Korea's decision to delay the implementation of Basel III is moderately credit negative for the country's banks.

"Korea's decision to delay is moderately credit negative for the country's banks, as we see this delay as representing a missed opportunity for Korea to strengthen its bank regulatory framework in advance of the major industrial economies," says Young Il Choi, a Moody's Vice President and Senior Credit Officer.

Here's more from Moody's:

On 21 December 2012, Korea's Financial Services Commission said that it would delay adoption of Basel III capital requirements because it wanted to first observe how other countries implemented these rules. The delay was a last-minute reversal of Korea's original schedule to implement the guidelines at the start of 2013. The regulator has not provided an updated time frame.

Furthermore, the delay has come despite the fact that the capital adequacy levels of almost all rated Korean banks are already sufficiently above the minimum requirements stipulated under Basel III.

"In our view, the postponement also reflects the regulator's ongoing reservations over the potential impact on the banks from the requirement that they maintain more capital over time, as Basel III norms will become more onerous. A related concern would be whether the banks would, as a result, be less inclined to lend to certain small-to-medium-sized enterprises or individuals over time" adds Choi.

Choi was speaking on Moody's release of a special report titled "Delay in Korea's Implementation of Basel III: Answers to Frequently Asked Questions ". The report addresses questions frequently asked by investors regarding the delay in the implementation of Basel III norms for Korean banks.