Foreign financial companies operating in South Korea have transferred 1.2 trillion won (US$1.08 billion) worth of funds a year on average to their headquarters durign the past five years, according to data released by the Financial Supervisory Service (FSS).
The financial regulator submitted the data to Rep. Park Yong-jin, a lawmaker of the ruling Democratic Party of Korea and a member of the parliamentary National Policy Committee, on July 8.
According to the data, foreign financial firms sent a total of 6.78 trillion won (US$6.08 billion) for five years from 2013 to the first quarter of 2018.
The FSS surveyed a total of 100 firms, including 40 banks, 11 securities companies, 28 insurance companies and 23 asset management companies. Since the figures of insurance companies are excluded in the first quarter, the actual amount for five years will reach nearly 7 trillion won (US$6.28 billion).
The amount of foreign financial companies’ remittances to their headquarters came to 1.03 trillion won (US$920.57 million) in 2013, 810.6 billion won (US$727.52 million) in 2014, 1.58 trillion won (US$1.42 billion) in 2015, 1.34 trillion won (US$1.2 billion) in 2016 and 1.39 trillion won (US$1.25 billion) in 2017. The figure stands at 1.23 trillion won (US$1.1 billion) a year on average.
Foreign financial firms sent 631.2 billion won (US$566.25 million) of money in the first quarter of this year alone, which is more than half of the annual average in the last five years, as profits, commissions, including data processing fees, headquarter expenses, like advertising costs, trade mark fees and consulting fees.
In particular, foreign banks transferred 3.46 trillion won (US$3.1 billion) of money to their headquarters in the past five years, accounting for over half of the total remittances. Standard Chartered Korea transferred the most at 878.8 billion won (US$788.37 million), followed by HSCB at 830.2 billion won (US$744.77 million), Citibank Korea at 471.3 billion won (US$422.8 million) and JP Morgan at 162.8 billion won (US$146.05 million).
The payout ratio of foreign banks is about twice the size of domestic banks. They also tend to transfer almost full amount of dividends to their headquarters.
In addition, foreign securities companies wired 1.74 trillion won (US$1.56 billion) of money to their headquarters in the last five years. Foreign insurance companies also remitted 1.19 trillion won (US$1.07 billion), while foreign asset management companies transferred 391.5 billion won (US$351.03 million).
In this regard, Park said, “Regardless of endless criticism, foreign financial companies continue to make a predatory remittance to their headquarters. I am planning to set up a legal system that can force them to reinvest a certain portion of profits in the domestic market and create jobs at the regular session of the National Assembly in the future. With a continuous emphasis on capital expansion to brace for the introduction of the Basel III and the IFRS, I will ask the FSS to look into whether foreign financial companies have problems with financial soundness.