"Stopping Bank Money Parties"... Employee Bonuses and Severance Pay Fully Disclosed

'Banking Sector Management and Business Practice System Improvement Measures' Task Force (TF)
Executive Performance Bonuses to Be Deferred for Up to 5 Years
Bank Social Contribution Also to Be Disclosed

Kim So-young, Vice Chairman of the Financial Services Commission, is giving a briefing on "Measures to Improve Banking Sector Management, Business Practices, and Systems" at the Government Seoul Office in Jongno-gu, Seoul, on the 3rd. Photo by Yoon Dong-joo doso7@

From now on, the performance bonuses, voluntary retirement payments, and dividend status of bank executives and employees will be disclosed in detail. The management status will be revealed so that the public can easily understand what banks do, how they generate profits, and how the generated profits are utilized.

The Task Force (TF) on "Improvement Measures for Banking Sector Management and Business Practices," formed by the financial authorities, announced on the 5th that it has prepared such measures to improve the bank performance compensation system.

Banks must prepare and disclose a "Bank Management Status Disclosure Report" on a trial basis during the third quarter of this year. The content to be prepared this time will be based on last year's management status. For management status after this year, the report must be prepared and announced by the end of April of the following year.

The report will include basic bank overview information such as total assets, branches, and number of employees, as well as asset-liability, revenue and expenses, and the use of net income for the current period.

In particular, the revenue and expense items must specify interest income including the interest rate spread between loans and deposits, fee income, salaries including performance bonuses and voluntary retirement payments, social contribution achievements, and provisions. The net income item will include capital reserves and dividend status.

A Financial Services Commission official stated, "The specific disclosure method will be determined when the report is released in the third quarter."

The performance compensation system for executives will also change to prevent a "performance bonus feast" focused on short-term results. The minimum ratio of deferred payment of performance bonuses for financial sector executives will be expanded from the existing 40% to 50%. The deferral period, originally 3 years, will be extended to 5 years.

Additionally, individual registered executives will be required to explain their compensation payment plans at the shareholders' meeting, and disclosure of individual executives' compensation amounts will be strengthened.

Social contribution activities of banks will also be disclosed by setting specific disclosure items. Domestic banks' social contribution expenditures amount to about 1 trillion won annually. However, according to the authorities' investigation, some disclosed items included brand usage fees that did not align with the purpose of social contributions, and in some cases, statutory contributions to the Korea Inclusive Finance Agency were also included.

Kim So-young, Vice Chairman of the Financial Services Commission, said, "We will systematically classify social contribution disclosure items according to their purpose and nature, and disclose qualitative achievements such as the Youth Leap Account in addition to quantitative aspects," adding, "We will prepare specific improvement measures by August."

Measures have also been established to address the reduction in the number of bank branches due to the spread of internet and mobile transactions. When deciding to close a bank branch, opinions from customers using the branch must be collected in advance, and alternative means such as joint branches and mobile branches must be provided upon closure.

Furthermore, customers using closed branches will be eligible for preferential interest rates and fee reductions.