Eun Sung-soo: "Dividend Restrictions Considered Due to COVID Situation... Will Reassess After 6 Months"

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[Asia Economy Reporter Park Sun-mi] Eun Sung-soo, Chairman of the Financial Services Commission, stated that regarding the recommendation to limit the dividend payout ratio to within 20% for six months on a temporary basis for the banking sector, the decision on whether to extend or terminate the measure will be made depending on future circumstances.

At the plenary session of the National Assembly's Political Affairs Committee on the 17th, Yoon Doo-hyun, a member of the People Power Party, questioned Chairman Eun Sung-soo, saying, "Considering the dividend payout ratios of major financial holding companies are around 26-27%, it is estimated that the dividend amount has decreased by about 610 billion KRW from the four major financial holding companies due to the recommendation to limit the dividend payout ratio to within 20%. The estimated loss to minority shareholders is about 88.7 billion KRW. Is the dividend loss to minority shareholders acceptable?"

In response, Chairman Eun said, "Please take into account the special situation caused by COVID-19. That money is not leaking elsewhere but is retained by the banks, so when the COVID-19 situation improves, dividends can be paid again at that time."

He continued, "The reason Industrial Bank of Korea was excluded from the dividend restriction recommendation is because, as a policy bank, it can easily raise capital through stock issuance, so there is no problem in terms of capital soundness," and emphasized, "The recommendation to restrict dividends for financial holding companies is not intended to cause losses to shareholders but to maintain capital soundness during the COVID-19 situation. Please understand this point."

Chairman Eun stated that the restriction to pay dividends within 20% of net profit is temporary for up to six months, but the situation afterward will be decided at that time. He said, "If the COVID-19 situation recovers and it is judged that there is no problem in terms of bank soundness, the current measure will be lifted and things will return to normal, but if the current situation continues, we will review the situation again and decide," indicating that the measure may be extended or terminated depending on circumstances.

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