State-owned banks face overhaulThe state-owned banks serving as creditors for the debt-stricken shipping and shipbuilding industries are likely next in line for restructuring.
“[We will] come up with a plan by September that would overhaul the organizations and their number of employees,” said Yoo Il-ho, the deputy prime minster for the economy and finance minister.
“Along with the recapitalization we have decided to minimize the burden that may be imposed on the public through all-around self-improvement efforts at state-owned banks and prevention of any moral laxity.
“The executives of Korea Development Bank [KDB] and Export-Import Bank of Korea [Korea Eximbank] will have their annual salaries cut while employees will return however much they received through a salary increase over the last two years.
The performance-based salary system will be expanded, the organization as well as its number of employees will be reduced, a stricter employment evaluation that adheres to the law governing the ethics of public servant will be adopted so that executives and employees will be restricted from being rehired irrationally and assets will be sold while the budget received from the government will be cut.”
According to the Ministry of Strategy and Finance, executives at KDB will see their salaries cut 5 percent this year compared to 2015. An additional cut will be made in 2017, although the exact amount has not been decided.
All employees will have to turn in however much more they earned this year from annual salary increases, while the employees at the team-leader level or higher will also have to return that amount for 2015.
The government will also cut this year’s budget for operation costs by 1.3 percent and plans to make an additional cut for the 2017 budget.
The number of employees will be cut 10 percent from this year’s 3,493 to 2,874 by 2021. Management will also be downsized as well. The bank currently has 10 vice-president level executives, which will be reduced to nine.
The number of KDB branches will be reduced from 82 to 74 by the end of 2020.
The bank will also sell its nonfinancial companies, helping it secure 2.4 trillion won ($2 billion).
Korea Eximbank will see the same annual salary cuts as KDB, and will also have to return the differences from earlier salary increases. The organization’s employees will be reduced 5 percent from the current 978 by 2021.
However, as Korea Eximbank has adopted the peak-wage system, which allows older employees to remain at the company as long as they accept a pay cut, there will be no downsizing until 2018.
Still, the number of vice-president level executives will be reduced from 10 this year to eight after 2018.
The performance-based salary system, which is currently applied only to heads of departments or higher, will be applied to all employees.
The organization itself will be reduced. There are currently nine departments, which will be reduced to seven in 2018. One will be downsized in the second half of this year while the other will take place in 2018.
The number of branches and offices will be cut from 13 this year to nine in 2020.
Korea Eximbank will also see its budget for operating costs cut 10 percent for this year and possibly further next year.
It will also sell four Korea Eximbank-owned residences that are provided to branch heads.
To step up the prevention of malfeasance, the government plans to increase the number of outside directors who specializes in policy finance.
The two state-owned banks have been in questions for allowing the shipping and shipbuilding industries to reach their current state. Some market experts have claimed these banks should be held accountable for their failure to detect the worsening situation and instead continuing to supply loans, a move that has now come to threaten the Korean financial market and overall economy.
The banks, particularly KDB, have never undergone corporate restructuring despite seeing their number of employees soar through various mergers and acquisitions, leading to huge spending of taxpayer money.
BY LEE HO-JEONG [email@example.com]
More in Finance
Stocks dip more than 2 percent as investors book profits from recent rally
BOK head expresses concerns over rapid growth of local stock market
BOK keeps base interest rate at record low of 0.5%
Gov't-backed loans offered to all small shops from Jan. 18
Retail investor funds up ￦20 trillion already this year