The monetary district of Yeouido in Seoul / Yonhap
A state-run suppose tank mentioned Wednesday that as Korea’s giant securities companies develop in measurement, laws governing their monetary well being needs to be strengthened, warning that the present technique creates a deceptive impression of soundness.
The Korea Improvement Institute (KDI) mentioned in its newest report that the calculation of the web capital ratio (NCR) for big securities companies needs to be reverted to the strategy used earlier than 2016.
The NCR measures the proportion of internet working capital to gross dangers and is a key indicator of a monetary funding firm’s stability.
“The present NCR system doesn’t absolutely mirror the growing dangers confronted by giant securities companies,” mentioned Hong Jong-soo, a KDI researcher.
He famous that the components adopted in 2016 creates the phantasm of an improved NCR as asset measurement will increase, at the same time as underlying dangers develop, giving the impression that giant securities companies stay financially sound regardless of a pointy rise in debt.
Complete property of home securities companies grew from 199.8 trillion gained ($134.9 billion) in 2010 to 851.7 trillion gained within the first half of this 12 months, the report mentioned. Over the cited interval, complete liabilities additionally sharply jumped from 162.6 trillion gained to 755.2 trillion gained.
