Korean financial institutions under state demands embark on legal review

South Korea’s financial holding firms faced with complaints from shareholders over its compliance with multiple state demands that can impair their bottom line have embarked on legal study in case they come against class or lawsuits from investors.

Financial holding institutions are bombarded with inquiries about their obligations in state policies under review – cap in dividend payout and profit-sharing with troubled enterprises.

The ruling party last month proposed a profit-sharing scheme designed to induce rich companies to share some of their gains with businesses struggling under the virus crisis in return for various incentives such as tax breaks.

The Financial Services Commission separately has set out to cap dividend payouts to under 20 percent for financial institutions to strengthen their capital adequacy levels.

The dividend payment ratio of the country’s four financial holding firms – KB, Shinhan, Woori and Hana – averaged at 26.1 percent as of last year.

They complain of contradicting measures from authorities as one demands a giving move that is negative to its capital base while the other requires lenders to keep up capital integrity nevertheless by sharing less with investors.

Financial companies have yet to disclose whether to accept the government proposals and how much profit they would share. They will draw up their plans as not to upset shareholders and draw legal suits from investors.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]