Government Asks Banks for Dividends

Korea’s government-run banks are creating dividends for the government. And the government is asking its public enterprises for even higher dividends to make up for its tax revenue shortfall.

According to the financial industry on February 24, the Korea Development Bank (KDB) will reportedly pay a dividend of up to 380 billion won this year to the government.

The KDB, which posted a record net income of over two trillion won in 2005, will pay a dividend at the end of next month after obtaining government approval on its closing accounts by the end of this month.

The dividends will comply with the Korea Development Bank Act, which was revised in 2005 and requires the Bank to allocate some of its net profits to shareholders starting 2006.

This is the first dividend payment for the KDB since its foundation in 1954. All of the bank’s shares are owned by the government.

The Bank’s dividend to the government was estimated to be about 300 billion won at first, but that amount increased after the government demanded that it should be between 350 billion and 400 billion won, citing shortages in tax revenue.

The Industrial Bank of Korea (IBK) has also raised its dividend rate to the government for 2006.

IBK Chairman Kang Kwon-seok said, “Unlike last year, we will apply the same dividend rate offered to ordinary shareholders to the government.”

The IBK applied a lower dividend rate to the government compared to the one it offered to its minority shareholders last year.

Suk-Min Hong smhong@donga.com