South Korea’s financial regulator ordered Citigroup Inc and Standard Chartered PLC’s units to investigate allegations that staff members or contract workers sold client information to private lending agents.
The Financial Supervisory Service (FSS) is waiting to hear from Citibank Korea Inc and Standard Chartered Bank Korea Ltd about the internal probes before deciding whether to conduct its own investigation, Lee Sang-koo, director-general of the agency’s bank supervision team, said by phone yesterday.
The FSS may begin inspecting the two banks regarding the allegations, the Seoul Economic Daily reported, without citing anyone.
The South Korean prosecutors’ office said in a Dec. 11 statement it arrested an employee of “Bank C” for leaking information on 34,000 clients, including details of lending contracts.
Citibank Korea confirmed in an e-mail yesterday that it was “Bank C.” The Seoul-based unit conducted its own investigation at the FSS’ request following the arrest, it said, without elaborating on the results of the probe.
The prosecutors’ office also arrested a worker from an information technology company contracted to a lender identified only as “Bank S” for stealing 104,000 clients’ information, according to the Dec. 11 statement.
The office is separately investigating 10 private lending agents, it said, without naming them.
The data was sold at up to 500 won (US$0.47) per piece of client information, the statement said.
The leaks were the “biggest ever” incurred by banks, prosecutors said.
Standard Chartered and Citigroup have seen their US$6 billion bet on South Korea turn sour in less than 10 years, as the two banks struggle to sustain profits in an economy plagued by rising household debt.
Standard Chartered took a US$1 billion writedown on the value of its business in the country in August, a cost that is set to end the London-based lender’s 11-year streak of record annual profits.
At Citigroup, South Korea will hurt revenue in Asia through next year, chief financial officer John Gerspach has said.
South Korean lenders have seen their return on equity (ROE), a measure of profitability, shrink by more than half over the past decade when Standard Chartered and Citigroup first pledged the largest-ever foreign investment in the country’s financial industry. With the government stepping up efforts to curb household debt, foreign banks have been left seeking ways to cut costs.
“Banks will have to accept the new normal of low growth, low return on equity,” said Yoo Sang-ho, a Seoul-based banking analyst at HI Investment & Securities Co. “They have to forget what they saw in the mid-2000s.”
Over the past five years, South Korean economic growth slowed to 2.9 percent from an average 5.8 percent in the nine years through 2008, according to the IMF, as household debt swelled.
At the same time, commercial banks saw their return-on-equity slump to about 7.4 percent last year from 20.3 percent in 2005, FSS data showed.
South Korean President Park Geun-hye, who took office in February, has pledged to ease consumer debt burdens by restructuring loans for low-income earners. The move follows measures already in place since 2006 limiting the amount people can borrow depending on their income and home values. In 2011, the financial regulator asked banks to provide more fixed-rate loans to reduce risks from increases in interest rates.
“Rules that limit household lending must have hammered profits at foreign banks who rely more on retail business than their domestic peers,” said Kim Hye-mi, a researcher at Seoul-based Hana Institute of Finance.
Profit of all 18 lenders in the country, including Standard Chartered and Citigroup, fell 42 percent to 4.8 trillion won in the first nine months of the year, as lending slumped and margins on loans shrank to a four-year low, the FSS said.
Standard Chartered, which does not provide quarterly earnings figures, said in August its South Korean consumer unit posted a loss of US$6 million after a US$100 million profit a year ago. Consumer banking revenue in the country may drop about 15 percent this year, it said on Dec. 4, without giving details.
Net income at Citibank Korea fell 28 percent from a year earlier to 145 billion won in the nine months ended September, figures from the US firm’s local unit show. Its ROE declined to 3.3 percent last year from 15.7 percent in 2005, the first full year after it bought Koram Bank.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said that its investment plan in Arizona is going according to schedule, following a local media report claiming that the company is planning to break ground on its third wafer fab in the US in June. In a statement, TSMC said it does not comment on market speculation, but that its investments in Arizona are proceeding well. TSMC is investing more than US$65 billion in Arizona to build three advanced wafer fabs. The first one has started production using the 4-nanometer (nm) process, while the second one would start mass production using the
When an apartment comes up for rent in Germany’s big cities, hundreds of prospective tenants often queue down the street to view it, but the acute shortage of affordable housing is getting scant attention ahead of today’s snap general election. “Housing is one of the main problems for people, but nobody talks about it, nobody takes it seriously,” said Andreas Ibel, president of Build Europe, an association representing housing developers. Migration and the sluggish economy top the list of voters’ concerns, but analysts say housing policy fails to break through as returns on investment take time to register, making the
‘SILVER LINING’: Although the news caused TSMC to fall on the local market, an analyst said that as tariffs are not set to go into effect until April, there is still time for negotiations US President Donald Trump on Tuesday said that he would likely impose tariffs on semiconductor, automobile and pharmaceutical imports of about 25 percent, with an announcement coming as soon as April 2 in a move that would represent a dramatic widening of the US leader’s trade war. “I probably will tell you that on April 2, but it’ll be in the neighborhood of 25 percent,” Trump told reporters at his Mar-a-Lago club when asked about his plan for auto tariffs. Asked about similar levies on pharmaceutical drugs and semiconductors, the president said that “it’ll be 25 percent and higher, and it’ll
CHIP BOOM: Revenue for the semiconductor industry is set to reach US$1 trillion by 2032, opening up opportunities for the chip pacakging and testing company, it said ASE Technology Holding Co (日月光投控), the world’s largest provider of outsourced semiconductor assembly and test (OSAT) services, yesterday launched a new advanced manufacturing facility in Penang, Malaysia, aiming to meet growing demand for emerging technologies such as generative artificial intelligence (AI) applications. The US$300 million facility is a critical step in expanding ASE’s global footprint, offering an alternative for customers from the US, Europe, Japan, South Korea and China to assemble and test chips outside of Taiwan amid efforts to diversify supply chains. The plant, the company’s fifth in Malaysia, is part of a strategic expansion plan that would more than triple
RSS