FSC recommends banks to keep dividends below 20% of earnings

2021. 1. 28. 13:53
글자크기 설정 파란원을 좌우로 움직이시면 글자크기가 변경 됩니다.

이 글자크기로 변경됩니다.

(예시) 가장 빠른 뉴스가 있고 다양한 정보, 쌍방향 소통이 숨쉬는 다음뉴스를 만나보세요. 다음뉴스는 국내외 주요이슈와 실시간 속보, 문화생활 및 다양한 분야의 뉴스를 입체적으로 전달하고 있습니다.

FSC Chairman Eun Sung-soo (Financial Services Commission)

South Korea’s top financial regulator said Thursday it has decided to advise major banks to maintain their dividend payouts below 20 percent of net income during the first half of this year in response to the prolonged economic fallout of COVID-19. 

Under the latest guidance by the Financial Services Commission, local lenders are expected to cut payments to shareholders by about 5 to 7 percentage points. Last year, the country’s four major banking groups -- KB Financial, Shinhan Financial, Hana Financial and Woori Financial -- paid out 26 percent, 25.97 percent, 25.7 percent, 27 percent of their profits in dividends, respectively. The FSC recommendation will remain in effect until June.

The dividend payout ratio is the amount of dividends paid to shareholders in relation to the total net income generated by a company. The dividend payout normally includes both the interim dividend and share buybacks.

The decision came after the FSC carried out a comprehensive stress test designed to gauge financial institutions’ ability to absorb risks under different economic scenarios. A number of bank holding companies fell short of the authority’s capital adequacy requirements under an L-shaped recession scenario, whereby an economy experiences a deep recession and does not recover to its previous rate of growth for several years. 

“In case the COVID-19 pandemic prolongs, local lenders need to take a conservative approach to their capital management, including loan issuance and dividend payments,” a FSC official said.

The authorities have been in talks with local banks on reducing dividend payouts since late last year as economic uncertainties continued due to the virus resurgence.

“Dividend payouts are closely related with shareholder value, so the FSC respects financial companies’ autonomous decision on dividends. However, we hope the firms to build up adequate levels of loan loss provision and capital base so that they can better respond to the COVID-19 impact,” said the FSC Chairman Eun Sung-soo during a press conference held in December last year.

Meanwhile, dividends that banks offer to their holding companies are not subject to the new guidance. Also, the state-run Korea Development Bank and the Export-Import Bank of Korea will be excluded from it. 

By Choi Jae-hee (cjh@heraldcorp.com)

<ⓒKoreaHerald(www.koreaherald.com)무단전재 및 재배포 금지>

Copyright © 코리아헤럴드. 무단전재 및 재배포 금지.

이 기사에 대해 어떻게 생각하시나요?