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Standard Chartered under investigation in South Korea

December 2014

South Korea’s financial regulator, the Financial Supervisory Service (FSS), is investigating Standard Chartered Bank (SC) Korea for allegedly sending excessive dividends of KRW 1.1 trillion to its headquarters in the UK.

The FSS says the bank recently set aside KRW536 bn and KRW 626 bn in March as dividends to be remitted to its shareholders.

“It is unreasonable that the bank with a weak performance makes excessive payouts to shareholders. The regular inspection of the bank is now underway and we will closely look at the allegation and will take action if something wrong is found,” an FSS official was quoted as saying in media reports.

Industry sources said the Korean unit plans to send the money to SC North East Asia (NEA), the British banking group’s paper company based in Hong Kong, through SC Korea, the bank’s financial holding company in Korea.

The bank is thought to be using dividends to defuse complaints about its weakening performance in Korea.

Standard Chartered has so far accumulated some KRW 3.5 trillion won in overall profits in Korea. The bank entered Korea in 2005 through acquisition of Korea First Bank, then the leading Korean bank.

However, the bank’s net profits have been declining annually for five years - from KRW 432 bn in 2009 to KRW 116 bn in 2013, according to the FSS.

It reported a deficit of KRW 11.4 bn for the third quarter of this year. As of this September, the bank had made a net loss of KRW 22.3 bn this year.

The bank responded to the FSS reports saying they had no plan to send dividends for 2014, and denied rumours that they might withdraw from or downsize in Korea.

Standard Chartered Group says that their presence in Korea is important to their global strategy. Even so, the bank shuttered many branches last year and more closures are expected.

The financial regulator has been toughening its stance on dividend payments by financial firms, especially Korean units of global banking groups.

The FSS can regulate what it judges to be excess outflows of capital across the border. It is normal for the authority to inspect a money-losing institution if it is found, or suspected of planning to transfer large amount of capital to other countries.

Multinational companies in Korea have drawn criticism for less than transparent ways of paying dividends overseas and paying opaque service charges to their parent firms. 




Asia | Corporate governance

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