Despite COVID-19 Impact, Some Financial Public Institution Heads Increase Business Promotion Expenses

Average Annual Bonus for Heads of Financial Services Commission Affiliates 23.89 Million KRW
Korea Housing Finance Corporation Highest at 45.37 Million KRW, Up 8.0% YoY
KAMCO Up 12.9% in One Year, Steepest Increase
3-4 Times Higher Than CEOs of Market-Type and Quasi-Market-Type Public Enterprises

[Asia Economy Reporter Song Seung-seop] Despite a decrease in various face-to-face events and related expenses due to the impact of COVID-19 last year, it has been found that the business promotion expenses of some heads of institutions under the Financial Services Commission increased. This points to the continued practice of using business promotion expenses with unclear detailed breakdowns, even as the government steadily pushes for reductions in such expenses.

According to Alio, the public institution management information disclosure system, on the 4th, the average business promotion expenses of heads of eight financial public institutions last year (Korea Inclusive Finance Agency, Korea Credit Guarantee Fund, Korea Deposit Insurance Corporation, IBK Industrial Bank of Korea, KDB Industrial Bank, Korea Securities Depository, Korea Asset Management Corporation, and Korea Housing Finance Corporation) and the Financial Supervisory Service amounted to 23.89 million KRW. This is a 5.9% (1.53 million KRW) decrease from the previous year (25.42 million KRW), but still remains at a high level.

Business promotion expenses for institution heads refer to funds that local government heads or institution heads can use relatively freely within a set budget. These expenses are used for job performance, policy promotion projects, and smooth progress of investment projects, and were previously called operating expenses.

The institution with the highest business promotion expenses was the Korea Housing Finance Corporation, reaching 45.37 million KRW. Despite the overall reduction in face-to-face events due to COVID-19, this was an 8.0% (3.38 million KRW) increase from the previous year (41.98 million KRW). The policy banks IBK Industrial Bank of Korea and KDB Industrial Bank also spent 37.26 million KRW and 34.43 million KRW respectively last year. The Financial Supervisory Service, classified as a capital-free special corporation, reported 34.61 million KRW in business promotion expenses for its head.

The steepest increase was recorded at Korea Asset Management Corporation (KAMCO). Last year, KAMCO’s head’s business promotion expenses were 18.11 million KRW, a 12.9% (2.07 million KRW) increase from the previous year (16.04 million KRW). Compared to 2018, when the expenses were 11.45 million KRW, this is a 58.13% (6.66 million KRW) increase. KAMCO disclosed that the expenses were used for related institution work explanations and consultations, congratulatory and condolence wreaths, and external policy consultations.

Financial Public Institution Heads’ Business Promotion Expenses Three Times Higher Than Other Public Enterprises

The business promotion expenses of these institution heads were significantly higher than those of other public enterprises. Last year, the average expenses for heads of 16 market-type public enterprises were 7.84 million KRW, and for 20 quasi-market-type public enterprises, 6.96 million KRW. In total, these amounted to 131.26 million KRW and 139.33 million KRW respectively. The total business promotion expenses spent by heads of institutions under the Financial Services Commission were 215.07 million KRW, about 70 to 80 million KRW more.

Public enterprises generally have been reducing business promotion expenses. This is because it has been pointed out that the detailed usage is difficult to ascertain and could be misused as the institution head’s petty cash. Heads of market-type public enterprises reduced their average expenses from nearly 10.23 million KRW in 2017 to 7.84 million KRW over three years, a decrease of 2.39 million KRW. Quasi-market-type public enterprises also reduced expenses from 8.68 million KRW to 6.96 million KRW.

Industry insiders argue that the unique characteristics of financial institutions must be considered. A representative from a financial public institution explained, "Due to the nature of the institution, many cases involve performing both B2B and B2C simultaneously. Since there are many contacts with related institutions, the scale of business promotion expenses inevitably becomes large." Another institution representative stated, "Although classified as other public institutions under the Financial Services Commission, the roles they play in finance are different. The size of internal personnel and organization must also be taken into account."

Nevertheless, experts emphasize the need for efforts to reduce unclear usage of business promotion expenses. Professor Kim Dae-jong of the Department of Business Administration at Sejong University pointed out, "Many financial public institutions operate with tax funds or projects based on applications from private financial companies. For areas where expenses are necessary and frequent, efforts should be made to resolve them through budget execution rather than business promotion expenses."

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