Foreign banks operating in Korea appear to have scrapped their plan to offer more generous dividend payouts to main shareholders in the face of alleged opposition from the nation’s regulatory officials.

Among the lenders are Standard Chartered Bank Korea and Citibank Korea, according to the Financial Supervisory Service.

“Paying huge dividends to main shareholders ― more specifically to their parent groups in the U.S. and U.K. ― is spurring concerns about massive capital outflow and the local units’ financial soundness,” said a senior FSS official who asked not to be named.

He said the foreign investment community had given huge dividend payouts, while it had been relatively negligent in social contribution activities.

Amid repeated instruction from the FSS to slash the dividends, SC Bank Korea reportedly decided to set the total dividend payout for its 2012 earnings at about 200 billion won ($185 million).

Though the local unit of the U.K.-based lender had sought to raise the sum of the payout, the FSS recommended the bank to spend an appropriate amount as to not hurt its fiscal standing.

The 200 billion won figure is similar to SC Bank Korea’s dividend payments in 2010 and 2011.

Over the past few years, SC Bank Korea has remitted a large portion of the dividends to its headquarters in London.

“After purchasing Korea First Bank in 2005, Standard Chartered invested 4.4 trillion won in Korea,” an SC Bank Korea official said, noting it was the biggest direct investment made by a foreign company. “Compared to that, the dividend paid to Europe is relatively small.”

Citibank Korea has cut its interim dividends for its 2012 earnings to 80 billion won, compared with 130 billion won in 2011. The local unit of the U.S.-based Citigroup had to slash the payments as its net profit fell by 460 billion won between 2011 and 2012.

About a year ago, Citibank Korea complied with regulatory officials’ call to halve its record interim dividend payment.

By Kim Yon-se (kys@heraldcorp.com)