The Financial Supervisory Service (FSS) said it will introduce the new Basel Accord, also known as Basel II, by 2007 to keep pace with advanced banking systems.
Korea's 19 domestic banks are subject to the new Basel Accord designed to strengthen risk management, modify the definition of risk-weighted assets and underpin market principles.
“The South Korean banking system has improved greatly since the 1997 financial crisis. However, it has to go the extra mile to satisfy international standards,” the FSS's New Basel Accord Office director Lee Kang-se said.
Under Basel II, the FSS will keep a watchful eye on banks to see if they manage their risks well and maintain a healthy Bank for International Settlements (BIS) capital ratio. The more risky banks are, the higher the obligatory BIS ratio will be.