Kang Seok-hoon, the CEO of the Industrial Bank of Korea, speaks at a regional corporate meeting announcing the launch of the Busan Industrial Transformation Green Fund held at the Busan International Financial Center in Nam-gu, Busan on Feb. 10. /Courtesy of Yonhap News Agency

Kang Seok-hoon, chairman of the Korea Development Bank, noted on the 23rd (local time) that he is "seriously considering the sale of HMM equity."

Kang said during a press conference held after the "NextRound in Silicon Valley" event, which took place in Silicon Valley, California, that "I have been thinking a lot about the possibility of forcing the Korea Development Bank into a risk situation."

Kang revealed that the reason for reviewing the sale of HMM equity is that the soundness of the Korea Development Bank is threatened by HMM's stock price. A key indicator of a bank's soundness is the Basel III capital adequacy ratio. This ratio is calculated using the bank's risk-weighted assets as the denominator and the bank's capital as the numerator. The recommendation for the bank's capital adequacy ratio by our financial authorities is 13%.

The Korea Development Bank holds approximately 36.02% of HMM equity, and if the value of this stock rises to exceed 15% of the bank's capital, a risk weight of 1250% will be applied to the equity above that 15%. Kang stated, "When HMM's stock price exceeds 18,600 won, this weight is applied." As of the 24th, Korean time, HMM's stock closed at 18,940 won.

If the risk weight increases sharply, the risk-weighted assets, which are the denominator in the Basel III ratio calculation, will increase significantly. In contrast, the capital, which is the numerator, increases relatively modestly. Since the denominator increases significantly more than the numerator, the Basel III ratio is bound to decline. Kang emphasized, "If HMM's stock price exceeds 25,000 won, the current Basel III ratio in the upper 13% range becomes risky," adding, "The Basel III ratio must not fall below 13%.”

He continued, "With the new government coming in, it’s challenging to do anything through intergovernmental agreements, and it’s irresponsible to remain idle." He expressed, "As the chairman of the Korea Development Bank, I have many concerns."

Meanwhile, Kang stated at the NextRound event in Silicon Valley that he plans to invest 1.7 trillion won in Korean startups this year. The Korea Development Bank has set the indirect investment amount for startups at 1.17 trillion won and the direct investment amount at 525 billion won for this year.