Larger South Korean banks to face Basel capital floor issues

But impact from IFRS 9 will be limited.

The modest risk appetites and improving profitability prospects should keep the commercial banks’ average Fitch Core Capital ratio above 13%.

"The larger banks face Basel capital floor issues, which may hold back meaningful improvements in their capitalisation ratios," says Fitch.

Fitch expects the impact from the implementation of IFRS 9 in 2018 to be limited as the banks have shifted their loan mix significantly towards household loans, which have performed very solidly while cutting the exposures to weak industrial sectors.