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The performance bonuses of the five major commercial banks, including KB Kookmin Bank, Shinhan Bank, Woori Bank, Hana Bank, and NH Nonghyup Bank, were found to have reached 2 trillion won last year. It increased by around 10% compared to last year, but some banks did not include serious reasons such as criminal punishment in the reasons for redeeming incentives.
On the 16th, the Financial Services Commission announced the results of the discussion on the working group meeting of the Bank Management, Sales Practices and System Improvement (TF) 3rd Bank held on the morning of the 15th, and the current status of payment systems was discussed. such as incentives in large banks. The performance bonuses of the five banks investigated by the financial authorities for this discussion were tentatively counted at a total of 1,959.5 billion won, up about 10 percent from the previous year. Severance pay increased by about 11% from 2021 to 1,515.2 billion won. This is equivalent to the sum of the non-interest income (3,562.6 billion won) of the five big banks last year.
Excluding fixed salaries, the big five banks pay an average of about 300 billion won a year alone in performance bonuses, but have been lukewarm about the policy of withdrawing or postponing performance bonuses. The financial authorities said, “There were cases where sanctions, criminal punishment, false financial statements, etc. were not included in the reasons for withdrawal.”” he explained. In this regard, it is known that the bank has said that it would consider adding a criminal penalty, etc., to the reason for the redemption.
Financial authorities drew attention to the fact that there was also a problem with the method of evaluating the performance of bank presidents and others. This is because when evaluating short-term performance, the proportion of ‘profitability’ indicators based on current net income and commission income is close to 40% on average. In the long-term performance evaluation, the proportion of profitability indicators reached an average of 77%. This is very different to foreign banks, which have less than 30% of the points allocated to them when evaluating profitability indicators.
An official from the Financial Services Commission said, “In addition to innovative efforts, it was said at the meeting that we should consider whether the performance of executives and employees is the result of innovative projects or ideas or simply the difference in interest rates. increase in profits in line with market conditions such as rising interest rates.” “Some say that the performance compensation system needs to be designed to mitigate the economy’s amplitude,” he explained.
Kim So-young, vice chairman of the Financial Services Commission, also said, “The recent large-scale profits of the banking sector have a significant impact on the external factor of the recent increase in interest rates in a situation where the scale of loans has increased sharply due to Corona 19 and continued low interest rates rather than the efforts of executives and employees.” It is necessary to pay to consider medium to long-term aspects according to actual performance rather than external factors so that we can do our best,” he pointed out.
He continued, “It is important for the banking sector to make efforts to improve themselves, such as transparently disclosing the performance and remuneration system. It will be of great help in resolving questions and debates, such as whether the growth and development of the bank was sufficient to take into account.”
Accordingly, at the meeting, ideas emerged that it is necessary to diversify payment methods to stocks and stock options as well as cash, and to diversify payment methods to deferred payments rather than lump sums. Attention was also drawn to the fact that more weight should be placed on asset soundness, capital soundness, and efforts to strengthen consumer protection rather than profitability when measuring performance.
