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Financial firms in belt-tightening to combat economic slump

All Headlines 16:09 August 23, 2012

SEOUL, Aug. 23 (Yonhap) -- South Korean financial firms are shifting into emergency mode through pay cuts and layoffs as persistent global economic woes are feared to dampen their profits, market watchers said Thursday.

Local credit card firms including Hyundai Card Co. are scrambling to streamline their business operations, they said.

Hyundai Card reduced its number of business division from 140 to 121 to cope with faltering earnings, the company said.

Growth of South Koreans' credit card spending decelerated in the first half from a year earlier mainly due to the local economy's slowdown, according to Credit Finance Association (CREFIA), which damaged the firms' earnings.

The earnings were also dented by the government measures to curb credit card firms' excessive competition by setting ceilings on loan increases and marketing costs, CREFIA added.

Local insurers also expect a massive layoff following damages on their profitability due to the economic slump, while ongoing acquisitions may add to further job cuts, market watchers said.

The unionized workers at ING Life Korea, for example, kicked off an indefinite strike in July, demanding the potential buyer of the life insurer retain its members after the acquisition.

"We are planning to slash the workforce by 10 percent due to deteriorating margin and increasing number of clients wishing to close their accounts," said an official from a local life insurer.

Meanwhile, South Korean banks, which already trimmed their workforce through voluntary retirement programs after the global financial crisis in 2008, are striving to find alternative ways to cut costs, market watchers said.

Top player Kookmin Bank is planning to extend the length of unpaid vacations in an effort to cut labor costs, while other banks are preparing similar measures, market sources said.

Nonghyup Financial Holdings Co., the fifth-largest financial holding company in South Korea, also slashed its executives' salary by 10 percent while suspending costly corporate events, a company official said.


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