[Political Affairs Committee Urgent Survey] Sharp Divide Between Ruling and Opposition Parties on Profit Sharing and Dividend Reduction

Our Newspaper, Emergency Survey of Political Affairs Committee Members
7 Support Profit Sharing, 6 Oppose
'Pain Sharing' vs 'Management Intervention' Divided
Consensus on Extending COVID Loan Maturities

[Asia Economy Reporter Kwangho Lee] Lawmakers from both ruling and opposition parties on the National Assembly's Political Affairs Committee showed starkly contrasting views on the introduction of a 'profit-sharing system' in the financial sector. There was a clash between the argument that profits should be shared as a form of pain-sharing due to COVID-19 and the opinion that excessive management intervention, rather than voluntary participation, could cause side effects. There were also clear differences in positions regarding the recently controversial issues of 'dividend reduction recommendations' and 'pushing for a 6-year term limit for chairpersons.' As the ruling and opposition parties' stances sharply diverged, concerns arose that the financial industry could be hampered by political strife.

According to a survey conducted by Asia Economy on the 15th targeting 24 lawmakers from the National Assembly's Political Affairs Committee on 'major financial sector issues,' among the 13 lawmakers who expressed their opinions, 7 (53.84%) responded in favor of promoting the 'Financial Institution Interest Freeze Act' as part of the profit-sharing system.

On the other hand, all 6 opposition lawmakers (46.15%) opposed it. The opinions of the ruling and opposition parties showed a clear divide. The government and ruling party plan to expedite legislation by handling related bills in this month's extraordinary session of the National Assembly, so difficulties are expected.

The proposal to limit the term of financial holding company chairpersons to 6 years was evenly split, with 5 (38.46%) in favor and 5 opposed. Three (23.07%) withheld their opinions. Last year, Kim Han-jung, a member of the Political Affairs Committee, proposed a bill to prevent long-term rule by financial holding company chairpersons. Last year, Cho Yong-byeong, chairman of Shinhan Financial Group, and Sohn Tae-seung, chairman of Woori Financial Group, entered their second terms, and Yoon Jong-kyu, chairman of KB Financial Group, was reappointed for a third term. Kim Jung-tae, chairman of Hana Financial Group, has held his position for eight years since 2012.

There was also a significant difference in views on 'restraint in dividends by banks and financial holding companies.' Seven (53.84%) supported it, while five (38.46%) opposed. Last year, most financial holding companies posted record-high net profits, but financial authorities recommended dividends be kept within 20%, resulting in a 5-7 percentage point decrease per share compared to the previous year. Some financial holding companies have postponed decisions to their March board meetings.

Conversely, regarding the 'extension of loan maturities and interest repayment deferrals for small and medium-sized enterprises and small business owners,' which financial authorities plan to announce at the end of this month, all 13 (100%) agreed on its necessity. However, the consensus is that a thorough assessment of at-risk companies should precede this.

Regarding the 'introduction of unilateral binding force' and the 'need for the Financial Supervisory Service's independence,' both initiatives driven by Yoon Seok-heon, the Financial Supervisory Service chief, 8 (61.53%) and 10 (76.92%) respectively responded positively, indicating a favorable atmosphere.

This content was produced with the assistance of AI translation services.