South Korea’s financial regulator said Thursday it will introduce stricter capital rules next year for local banks in line with international efforts to buffer against any financial crisis.

But the new regulations will be applied starting in 2015 as local banks are required to prepare for the strengthened rules, the Financial Services Commission said.

Under the new regulations, also known as the Basel III, banks are required to secure an adequate level of capital ratios set by the Basel Committee on Banking Supervision in three different types― common Tier 1, Tier 1 and total capital.

Common Tier 1 refers to banks’ common stocks or retained earnings that are non-redeemable except in cases of liquidation.

Tier 1 consists of common Tier 1 and other assets like call options. The total capital ratio combines Tier 1 with supplementary capital (Tier 2), which includes hybrid debts or subordinated bonds.

Under the existing Basel II, a bank is usually considered to be financially sound if it keeps its total capital ratio at 8.0 percent or above.

Under the new measures, local banks are required to maintain their common Tier 1 at least at 4.5 percent in 2015. They are also required to keep their Tier 1 ratio at least at 6.0 percent in 2015. But the minimum total capital ratio will be kept at 8 percent through 2015.

The toughened capital rules came as calls for stricter capital requirements for banks grow to prevent a financial fallout from excessive leveraging or as such.

From 2015, a bank found to have failed to meet the capital requirements will be subject to the watchdog’s corrective measures, the FSC said. The lender will either be advised or forced to improve its capital bases, according to the regulator. (Yonhap News)