Korean banks will see weaker capitalization under looser regulatory risk-weight requirements, S&P Global Ratings said in a Monday release.

Government efforts to boost banks' corporate financing, such as venture capital investments and allotment to a proposed state-led national growth fund, could increase their exposure to equities and funds, the rating agency said.

These measures could dampen the banks' risk-adjusted capital (RAC) ratios, with potential downgrades for those with greater risk exposures, according to S&P.

The rating agency still expects banks to continue exhibiting modest growth appetite given US trade volatility and parent groups' efforts for higher shareholder payouts.

A 10% rise in equity and fund holdings would result in a modest decline in top banks' capitalization, while a doubling of this figure could lead to their average RAC ratio dropping to 7.3%, S&P said.