The Financial Services Commission approved payment of about 83 billion won in unpaid allowances at Industrial Bank of Korea (IBK). IBK is a state-run bank subject to an aggregate personnel expense cap, and the Financial Services Commission lifted that limit. This is the first time a state-run bank has received approval for an exception to aggregate personnel expenses.
According to the financial sector on the 14th, the Financial Services Commission recently approved an exception to IBK's aggregate personnel expenses after a management budget review and a regular meeting. As a result, IBK employees will be able to receive about 83 billion won in unpaid allowances that had accumulated through last year. That comes to about 6 million won per employee.
Once the Financial Services Commission delivers an official document to IBK confirming its final approval of the exception to aggregate personnel expenses, IBK will convene its board of directors to vote on the allowance payments. An IBK official said, "We plan to pay the unpaid allowances to employees as quickly as possible."
The unpaid allowances will be paid not from the government budget but from money IBK earned through business activities. Because all public institutions, including state-run banks like IBK, are subject to the total personnel cost system, they cannot freely spend on labor costs no matter how much profit they make. IBK posted a net profit of 2.7 trillion won last year.
Earlier, IBK labor and management reached a tentative agreement in Feb. to make a lump-sum payment of 83 billion won in unpaid allowances. It came about three weeks after the union began a campaign to block Bank President Jang Min-young from reporting to work.
Afterward, the Financial Services Commission asked IBK to "draw up measures to prevent a recurrence of wage arrears and have labor and management reach an agreement." In response, IBK labor and management agreed on efficiency measures such as gradually reducing excessive overtime by employees and creating staffing conditions that allow them to use compensatory leave accrued from overtime in a timely manner.
This development has opened the possibility that other public institutions may also seek exceptions to aggregate personnel expenses. However, the industry view is that the Financial Services Commission is unlikely to grant additional approvals. A financial industry official said, "IBK's unpaid allowances were large in scale, and the president personally ordered a resolution, making this an exceptional case in which an exception was approved."
President Lee Jae-myung, during a financial sector briefing in Dec. last year, ordered a resolution, saying, "There is much talk because of wage arrears at IBK. It seems the government may have, in effect, pressured them to operate in violation of the law."