Seoul: The country’s financial watchdog announced on Thursday its intention to urge financial firms to manage their incentive systems in a proper and reasonable manner. The Financial Supervisory Service (FSS) highlighted that improperly managed incentive systems can pose risks, potentially damaging the soundness of financial institutions and the broader sector’s financial stability.

According to Yonhap News Agency, some financial firms have faced criticism for awarding substantial incentives to employees and executives despite failed real estate development projects. Additionally, certain firms have been criticized for their lax management of incentive systems in alignment with regulatory guidelines, the FSS noted.

Data from the FSS revealed that banks, securities firms, and other financial institutions distributed approximately 1.06 trillion won (US$758 million) in incentives, including performance-based pay, profit-sharing, and commissions, to employees and executives in 2023. This marked an 8.8 percent decrease from the 1.16 trillion won distributed the previous year. Investment companies, in particular, offered the largest share of these incentives, totaling 660 billion won in 2023, a decline of 9.5 percent from the year before. Banks followed with 159 billion won, marking an 8.3 percent increase, while insurance firms distributed 143 billion won, reflecting an 18 percent drop.

The data also showed that cash grants were the most popular form of incentives, accounting for 66.8 percent in 2023, followed by stocks and stock-related products at 20.6 percent, and other forms at 12.6 percent.