Bloomberg News

Standard Chartered’s Korean Bank Unit Workers Strike for Pay

June 26, 2011

(Updates with comments from bank in the eighth paragraph.)

June 27 (Bloomberg) -- Workers at Standard Chartered Plc’s South Korean banking unit plan to go on strike today in the worst labor dispute involving foreign banks in the Asian nation in more than five years.

About half the employees at Seoul-based Standard Chartered First Bank Korea Ltd. will protest against a plan that would determine compensation based on individual performance, union spokesman Bae Kwang Jin said by telephone in Seoul.

The strike comes as London-based Standard Chartered, which entered South Korea in 2005, struggles to attract more borrowers in Asia’s fourth-largest economy. The local unit is also awaiting a decision on the penalty it may need to pay after Korean regulators said it violated rules barring lenders from trading in platinum.

“Management appears to want to boost the bank’s efficiency after failing to expand market share,” said Hwang Seok Kyu, a banking analyst at Seoul-based Kyobo Securities Co. “If the strike drags on, that would be a bigger setback for the bank. It’s already not faring well in the fierce competition among Korean lenders.”

The bank will operate all branches with the staff not participating in the strike, trying to ensure basic services won’t be affected, Lee Ji Won, a Seoul-based spokeswoman at SC First Bank, said by telephone today.

Incentive-Based Pay

About 3,000 union members employed by the local unit plan to walk off the job “indefinitely,” Bae said on June 16. SC First Bank employed about 6,500 people and had 409 branches nationwide as of March 31, according to a regulatory filing.

Workers will strike until the company agrees not to adopt the incentive-based salary system, which would create excessive competition and cut salaries by as much as 46 percent, the union has said.

Such a steep reduction in salaries is only possible “under extraordinary circumstances” where employees continuously receive the lowest rating on their performance and fail to meet the lowest target they agreed on with their managers, the bank said in an e-mailed statement.

SC First Bank’s latest proposal offers union members a 5 percent increase in their average base salary, and the new incentive arrangement may give them as much as a 10 percent pay raise, the bank said.

Seeking Agreement

“We are keen to see an end to the strike as soon as possible, so that we can continue with negotiations, in order to reach an agreement that’s mutually beneficial for all parties,” the statement said.

Citigroup Inc.’s South Korean banking unit shut about a third of its 253 branches in December 2005 due to a strike following the acquisition of a local lender.

Standard Chartered operates five affiliates in South Korea including a consumer finance unit under a holding company that was formed after the U.K. lender purchased Korea First Bank for $3.3 billion in 2005. Loan market share for SC First Bank, ranked sixth by assets among seven nationwide commercial lenders, dropped to 5.7 percent at the end of 2010 from 8.2 percent in 2004, before the acquisition.

Korea’s Financial Supervisory Service held a meeting on June 16 to decide penalties against SC First Bank following the regulator’s probe into the bank’s platinum lending to local companies, Park Sae Chun, a director of banking supervision at the FSS, said the next day. The regulator hasn’t determined the penalties yet, it said at the time.

South Korea accounted for about 11 percent of Standard Chartered’s total $16 billion in revenue last year, according to data compiled by Bloomberg.

--Editors: Chitra Somayaji, Russell Ward

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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