Financial Authorities Grant Three-Year Waiver on Risk Weighting for KDB’s HMM Stake

Financial Authorities Grant Three-Year Waiver on Risk Weighting for KDB’s HMM Stake: Kim Jisun / Published : 07/02/2025 03:38 AM

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[Alpha Biz= Kim Jisun] South Korea’s financial authorities have issued a non-action letter to the Korea Development Bank (KDB), allowing it to defer risk-weighted capital requirements on its stake in HMM for three years.

According to the Financial Supervisory Service (FSS) on July 1, the exemption, issued on June 30, temporarily waives the application of a 1,250% risk weight on the portion of KDB’s HMM stake that exceeds 15% of its total capital.

Under current regulations, equity holdings in a single company exceeding 15% of a bank’s capital are subject to significantly higher risk weightings, which can negatively impact key financial soundness indicators. For KDB, this includes its BIS (Bank for International Settlements) capital adequacy ratio.

KDB currently holds approximately a 36% stake in shipping company HMM. As HMM’s share price has risen and the bank has exercised conversion rights on HMM’s perpetual bonds, concerns have grown that the bank’s BIS ratio could fall below critical thresholds.

Former KDB Chairman Kang Seok-hoon remarked in April that “with the stake in HMM exceeding 15%, if HMM’s share price rises above 25,000 KRW, our BIS ratio, currently in the high 13% range, could be at risk,” adding that the bank was “seriously considering selling part of its stake.”

The temporary exemption is expected to provide KDB with more flexibility in managing its HMM holdings while maintaining regulatory capital adequacy.