The Export-Import Bank of Korea saw its financial health worsen in the first quarter this year because of its heavy exposure to troubled shipbuilders, the financial watchdog said Monday.

The capital adequacy ratio of the state-run export agency stood at 9.89 percent as of end-March, dropping below 10 percent-level again in six months. 

“As the debt restructuring of shipbuilding and shipping industries began in earnest, Korea Eximbank set aside capital and this led to net losses and decrease in the ratio,” said Min Byung-kwon, an official at the Financial Supervisory Service.

According to the financial regulator, the average CAR of 18 commercial and state-run banks came to 14.02 percent, up 0.11 percentage points from the previous quarter.

Korea Eximbank logged the lowest capital ratio and is the only lender that posted under 10 percent figure.

The on-quarter fall in the capital ratio came as the policy lender has been reeling from massive losses stemming from the collapse of a slew of shipbuilders that are saddled with mounting losses.

As the main creditor, Korean Eximbank needs to put aside several hundreds of billion won of loss provisions for nonperforming loans as its debtor STX Offshore & Shipbuilding has filed for receivership last week.

The ratio, a key barometer of financial soundness, measures the proportion of a bank’s capital to its risk-weighted credit. The Bank for International Settlements, an international organization of central banks, advises lenders to maintain a ratio of 8 percent or higher since late 1992.

Meanwhile, the Korea Development Bank decided Monday to recapitalize the Korea Eximbank by giving the lender shares worth 500 billion won ($419.5 million) in Korea Aerospace Industries as part of efforts to increase the BIS ratio of the lender above 10 percent.

By Park Han-na (hnpark@heraldcorp.com)