By Kang Seung-woo
Korea’s financial authorities, apparently alerted by the anti-Wall Street protests reaching Seoul, are upping their speechifying against what they see as overflowing corporate greed in the financial district of Yeouido.
Officials at the Financial Services Commission (FSC) say the regulator is ready to regulate “excessively” high salaries and large dividend payments at banks, securities firms and other financial companies.
“It is not easy for the government to interfere in private firms’ decisions about wages and dividends. But it is obviously a problem that financial institutions are quick to approve massive dividend payments whenever they can when many of them had been bailed out by taxpayer money during times of trouble,’’ an FSC official said Sunday on condition of anonymity.
Local banks have been facing a public relations crisis after they were forecast to pay out hefty dividends on the strength of their record profits.
According to official figures, the country’s 18 local banks combined for a net profit of around 10 trillion won in the first six months of the year after adding 5.5 trillion won in the second quarter.
Government officials believe that the banks have a real shot at topping the 15 trillion won of annual profit they made in 2007, which remains an all-time high, and 20 trillion won (about $17.28 billion) could be achievable.
Although it’s hard to imagine financial authorities imposing detailed guidelines on financial firms for employee bonuses and dividend payments, they are likely to press the companies to set aside enough money to prepare for further rough patches under the ongoing global financial turmoil.
“The financial sector needs to explain its hundreds of millions of won it pays out in salaries,” FSC Chairman Kim Seok-dong recently said.
“They are required to set aside money to improve their ability to deal with worsening global uncertainty (rather than paying hefty dividends).”
Over the past five years, the nation’s top four financial services companies ― Shinhan Financial, Woori Financial, KB Financial and Hana Financial ― paid out 3.8 trillion won in dividends, accounting for 17.5 percent of their net profits during the period, according to the Financial Supervisory Service (FSS), the executive unit of the FSC.
By firm, Shinhan led the pack with a 22.9 percent dividend payment, followed by Woori at 14.6 percent, Hana at 11.5 percent and KB at 9.7 percent.
When it comes to banks’ dividends, the nation’s seven largest banks ― Kookmin, Woori, Shinhan, Hana, SC First, Citibank Korea and Korea Exchange Bank (KEB) ― paid out 10.5 trillion won over the last five years, or 32.5 percent of their net profits.
Brokerage houses also paid out a great deal in dividends, as the top five players paid out 1.8 trillion won, or 32.4 percent of their net earnings, at 5.6 trillion won.
In addition, the financial industry has enjoyed a salary binge.
The average monthly salary of the four financial holding groups for this year is 6.27 million won, with an employee at Shinhan earning the most at 7.52 million won.
As for brokerages, the payments of the top 10 players average 6.61 million won.