South Korea
Banking sector profile — Asia-Pacific
Data as of October 2026 • TGB Intelligence Unit
Policy rate as of 7 October 2026: 3.00% (source: Bank of Korea)
Banking sector at a glance
Structure and performance
South Korea's banking system is organised around financial holding companies. Five groups – KB, Shinhan, Hana, Woori and NH NongHyup – own the largest commercial banks alongside securities, insurance and card subsidiaries, and the country's ten financial holding companies had consolidated assets of KRW 4,391.0tn at end-June 2026, 71.3% of it in banking, according to the FSS (8 October 2026). The state-owned Industrial Bank of Korea and Korea Development Bank anchor policy lending to SMEs and industry.
Earnings remain dominated by net interest income. Banks earned KRW 32.2tn of interest income in the first half of 2026, but net profit fell 6.4% to KRW 13.8tn as rising market rates produced securities losses and non-interest income dropped 43.4%. The net interest margin was 1.56% and annualised ROA and ROE were 0.65% and 8.89%, against 0.54% and 6.44% for 2025.
At end-June 2026 the banks' CET1 ratio was 13.62%, the Tier 1 ratio 14.84%, the total capital ratio 15.77% and the leverage ratio 6.59%, and the FSS reported that the domestic banks' capital ratios satisfied regulatory requirements. CET1 capital rose KRW 8.8tn in the quarter on net income and equity offerings. Asset quality is drifting weaker from a low base: the substandard-or-below loan ratio rose to 0.63% at end-June 2026 from 0.59% a year earlier, and first-half loan-loss provisions rose 8.6% to KRW 3.5tn, with strain concentrated among self-employed borrowers, whose delinquency rate reached 1.99%.
The main risks are household leverage, property and the currency. Household debt was 85.3% of GDP in the first quarter of 2026, and in September the Bank of Korea's review of financial stability conditions showed its financial vulnerability index rising further, to 46.5 at end-June, and a 43.7% share of marginal firms in real estate. The central bank has also flagged rising Seoul-area housing prices. The won weakened to KRW 1,541.5 per dollar at end-June 2026 from 1,434.9 at end-2025 before strengthening sharply from July; the Bank of Korea judges the effect of exchange-rate swings on financial institutions' soundness to be limited.
Structural trends
The shifts shaping banking in South Korea.
Policy tightening: the Bank of Korea raised its Base Rate from 2.75% to 3.00% on 27 August 2026, lifting its 2026 growth forecast to 3.3% and projecting 2.7% inflation.
Earnings mix: first-half 2026 interest income reached KRW 32.2tn while non-interest income fell 43.4% on securities losses, cutting bank net profit 6.4% to KRW 13.8tn.
Macroprudential recalibration: the August 2026 housing package raised the 2026 household-debt growth target to 3%, tightened DSR income standards and introduced a sectoral systemic risk buffer on mortgages.
Group-based finance: the ten financial holding companies had consolidated assets of KRW 4,391.0tn at end-June 2026, up 8.0% in six months, with banking 71.3% of the total, and their first-half 2026 net income rose 13.7% to KRW 17.6tn, according to the FSS (8 October 2026).
Leading institutions
Largest banks in South Korea by total assets.
| # | Bank | Total assets (US$) | Type |
|---|---|---|---|
| 1 | KB Financial Group | US$556.1bn | Universal |
| 2 | Shinhan Financial Group | US$547.8bn | Universal |
| 3 | Hana Financial Group | US$470.1bn | Universal |
| 4 | NH Financial Group | US$420.1bn | Cooperative |
| 5 | Woori Financial Group | US$419.2bn | Universal |
| 6 | Industrial Bank of Korea | US$348.9bn | State-owned |
| 7 | BNK Financial Group | US$112.3bn | Commercial |
| 8 | iM Financial Group | US$68.9bn | Commercial |
Largest banks in South Korea by total assets, FY2025 audited accounts. Domestic groups as in the TGB Bank Rankings; subsidiaries of foreign groups shown with their own accounts and marked. Not a ranking table. Converted at official central-bank rates for each fiscal year-end.
Supervision and capital rules
The Financial Services Commission sets financial policy and licenses banks, the Financial Supervisory Service conducts prudential supervision and examination, and the Bank of Korea oversees macro-financial stability and payment systems. Korea adopted the Basel III credit-risk framework early, in 2020, and applied the Basel Committee's large-exposure limit to banks from February 2024. Five bank holding companies and their five main banks are designated D-SIBs for 2027 and carry a 1.0% CET1 surcharge; as D-SIFIs they must have recovery and resolution plans approved by the FSC every year. Korea Deposit Insurance Corporation coverage rose from KRW 50m to KRW 100m per depositor per institution on 1 September 2025. In August 2026 the authorities announced a sectoral systemic risk buffer to raise capital charges on mortgage lending.
What changed in 2026
- July 2026: The FSC confirmed the same five bank holding companies and five banks as D-SIBs and D-SIFIs for 2027.
- August 2026: The government's 13 August housing package expanded public guarantees for housing project finance to more than KRW 47.8tn and raised the 2026 household-debt growth target to 3% from 1.5%.
- August 2026: The Bank of Korea raised the Base Rate by 25bp to 3.00% on 27 August, with one board member dissenting, citing strong export-led growth and persistent inflation.
- September 2026: The FSS reported a domestic-bank substandard-or-below loan ratio of 0.63% for end-June, and the Bank of Korea's review of financial stability conditions flagged a further rise in financial vulnerability.
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