Woori Bank successfully issued tier-one KOKO Bonds worth $500 million, satisfactory with the Basel III Standards, in international financial markets on June 4, the bank announced recently.
The KOKO Bonds are to be turned into stakes in case the issuing bank goes into default and the issuing bank is no longer liable to reimburse investors in accordance to the bond if it is declared bankrupt.
Bonds are also the only way to strengthen the capital integrity of a bank without weakening its BIS capital ratio.
Woori Bank was put in a position in 2013 where it had to increase its capital with the international financial community and adopt Basel III Standards to prevent its own capital ratio from falling steeply.
The bank had to issue the KOKO Bonds to strengthen its capital in a bid to boost its value in time for its privatization through the sale of government stakes in the bank.
The maturity of the KOBO bonds that the bank issued is for 30 years, while a call option can be taken in five years from the issuance date.
The interest rate charged on the KOKO bonds issued by Woori Bank comes to 5 percent per annum, 3.3 percent tied to the interest rate charged on U.S. national bonds. Officials of Woori Bank said the interest rate charged on their KOKO Bonds is the lowest on KOKO bonds issued since the introduction of the Basel III standards.
Santander Bank of Spain issued its KOKO Bonds on the same day with Woori Bank with the interest rates higher than those on Woori Bank at 7.37 percent per annum, Woori Bank officials said.
Woori Bank also issued KOKO Bonds worth 240 billion won in the domestic financial market on the same day the KOKO bonds were issued abroad to bring total KOKO bonds issued to around 800 billion won. It was done to boost its capital ratio by 0.55 percent.
From next year, financial authorities are expected to strengthen regulations on Korean major banks’ capital ratios. The Financial Supervisory Commission said on June 4 it would select the D-SIB banks based on the Basel III Standards in the second half of this year and raise BIS Standards on common shares by 1 percent by 2019.
The current BIS Standards capital ratio required for nationwide commercial banks stands at 7 percent while the own-capital ratio for those banks stands at 10.5 percent. But D-SIB banks average share capital ratio stands at 8 percent, and that for the banks own capital ratio would be 11.5 percent by 2019.
The FSC plans to pick the D-SIB banks among 34 banks and financial holding companies in the second half of this year, with the banks affiliated with four major financial holding companies to be included among those picked.
At the end of last year, the own-capital ratio for average shares stood at 10.49 percent, showing that they don’t need to be raised, as they already meet BIS Standards.
Ethical management has been standardized and required by the ISO in the U.S. and other advanced countries advancing "Standardized Ethical Management."
Recognition of ethical management has been expanding in order to survive in an increasingly competitive global arena due to crises such as Enron and Worldcom. An "Ethical management evaluation model and evaluation index" has been developed that fits Korea's environment in order to establish and expand ethical management in Korea.
Woori Bank was originally established as Daehan Cheonil Bank to protect commercial supremacy in 1899. With the royal permission of Gojong, the Emperor, national capital was provided to the bank.
As stated in the bank’s founding purpose, currency circulation was the key to success of industries, and Woori Bank is to contribute to the development of the nation’s economy by providing support to corporations and SMEs.
_우리 이광구.jpg)
