South Korea’s financial authority on Wednesday called on financial institutions to improve their readiness levels for potential crises and assured the market amid the fallout of the Silicon Valley Bank collapse and troubles at Credit Suisse.

“We will ensure a soft landing by resolving shock elements from the adoption of the new Korea-Insurance Capital Standards (K-ICS),” the Financial Supervisory Service (FSS) said on Wednesday. “We will also pick out vulnerable institutions through a crisis analysis and help them preemptively raise capital.”

The FSS, in particular, advised credit card companies, savings banks, and mutual financial associations to pile up loan-loss reserves.

“We will monitor delinquency rates of household loans from small-to-mid private lenders and respond to potential risks by encouraging them to raise loan reserves,” it said.

The loan loss coverage ratio of credit card companies has remained above the 100 percent threshold but is still relatively low compared with other financial institutions. The ratio for credit card issuers stood at 106.7 percent at the end of last year, slightly down from 106.9 percent in the previous year. Mutual finance firms reported a slight increase in the ratio to 140.0 percent from 137.8 percent during the same period.

Savings banks were also advised to increase loss reserves in preparation for a weak property market while expanding capital.

The Financial Services Commission (FSC) and the FSS, in the meantime, advised large banks to expand capital by introducing countercyclical measures on March 15. The authorities plan to request banks to add more reserves.

By Han Woo-ram and Han Yubin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]