This file photo shows the banknotes of Korean won are displayed on a wall of a world money museum at KEB Hana bank in Seoul on June 9, 2016. (PHOTO / AFP)

SEOUL - South Korea will gradually unwind relaxed regulations on banks from the second half of this year, the country's financial regulator said on Tuesday.

In a statement, the Financial Services Commission (FSC) said it would normalize the loan-to-deposit ratio requirement on lenders from July. The ratio had been eased to 105 percent from the usual 100 percent late last year in response to a credit crunch in domestic financial markets and extended early this year amid global banking turmoil.

In case of an unexpected financial market crisis, the government will proactively review and swiftly implement necessary measures such as a pause on normalization or easing of regulation ratios. 

The Financial Services Commission

The liquidity coverage ratio (LCR) requirement - a proportion of net cash outflows that each bank has to hold as highly liquid assets - will be raised to 95 percent for the second half of this year, from 92.5 percent at present, according to the statement.

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The degree of further tightening of the LCR requirement, which was lowered during the COVID-19 pandemic, will be determined at the end of this year with consideration of market conditions, the FSC said.

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"In case of an unexpected financial market crisis, the government will proactively review and swiftly implement necessary measures such as a pause on normalization or easing of regulation ratios," the FSC added.