Banks criticized for paying hefty bonuses

Seen above are the headquarters buildings of Korea's four major commercial banks: KB Kookmin, Shinhan, Hana and Woori. Photos courtesy of each firm

By Park Jae-hyuk

Domestic commercial banks are facing criticism for their recent decisions to pay record amounts of bonuses to their employees, because their earnings last year were made mainly from interest on loans to households and self-employed people suffering difficulties amid the COVID-19 pandemic.

Earlier this month, Woori Bank's workers and management agreed to an increase in the size of the performance-based bonus from 130 percent of each employee's monthly base salary to 200 percent ― the maximum amount of performance-based bonus allowed by the bank's internal rules. Under the pretext of boosting worker morale, the bank's management decided to pay an additional bonus equivalent to each employee's monthly base salary and another 1 million won ($841) to each of them.

Workers and management of other major commercial banks signed similar agreements.

The size of KB Kookmin Bank's performance-based bonus was fixed at 300 percent of each employee's monthly base salary. A year earlier, the bank paid performance-based bonuses equivalent to 200 percent of each worker's monthly base salary and an additional 1.5 million won to each of them.

Shinhan Bank's employees received a performance-based cash bonus equivalent to 250 percent of each of their monthly base salaries on Dec. 31. They will additionally receive company shares equivalent to 50 percent of their monthly base salaries no later than April. The bank also gave Shinhan Card credit card rewards worth 1 million won to each employee on Jan. 3. A year earlier, it paid a performance-based bonus equivalent to 150 percent of each employee's monthly base salary and an additional 1.5 million won under the pretext of boosting morale.

Hana Bank's employees received a performance-based bonus equivalent to 250 percent of their monthly base salaries earlier this week. Each of them will additionally receive welfare incentives worth 800,000 won. A year earlier, the bank only paid a performance-based bonus equivalent to 200 percent of each employee's monthly base salary.

Rep. Noh Woong-rae of the ruling Democratic Party of Korea described the “bonus parties” as “predatory.”

“The banks are allowed to pay bonuses with their profits, but there exists a problem if their earnings were made mainly by interest on predatory loans to small business owners and low-income people,” he said. “Compared to foreign banks, where 50 percent of their profits relies on net interest margins, for Korean banks, 80 percent of their profits relies on net interest margins. They have filled their stomachs with the blood and tears of self-employed and low-income people.”

The lawmaker urged banks to carry out their social responsibilities, if they want to continue enjoying their privileges resulting from the high entry barrier into Korea's banking industry.