A slew of companies are tightening their belts by cutting jobs and wages and making employees go on mandatory leaves of absence as the stagnant economy drags out, with mounting household debts discouraging consumption.

Korea’s second-quarter household credit, or credit purchases and loans for households extended by financial institutions, hit a record high of 922 trillion won ($814.5 billion) as of the end of June, up 10.9 trillion won from three months earlier, the Bank of Korea said Thursday.

With economic outlooks remaining dismal, six out of 10 major conglomerates surveyed by the Korean Federation of Industries have already launched an emergency management system, and another 28 percent said they were considering it.

All of the 25 business groups polled said the current economic predicament was either more serious (64 percent) or similar (36 percent) to the global financial crisis in 2008.

Ninety-six percent said the Korean economy was unlikely to grow 3 percent or more. Four out of five said they do not expect the ongoing crisis to be resolved before the second half of next year.

The conglomerates picked sluggish domestic sales (46 percent) and low exports (29 percent) as their biggest hardships, followed by falling product prices (13 percent), lack of funds (4 percent) and increasing production costs (4 percent).

Many said they already cut investment or employment (16 percent) or were considering it (20 percent).

The financial sector has also joined the austerity drive, with banks reducing salaries or urging workers to take vacations, while credit card issuers and insurance companies are downsizing staff.

The extent of their retrenchment efforts from next month could widen based on the results of the ongoing collective bargaining between the financial trade union and management council.

The National Agricultural Cooperative Federation, or Nonghyup, which separated its banking and agricultural product distribution businesses early this year, began taking extensive cost reduction measures after declaring an emergency management system in early July.

Nonghyup said it would cut the executives’ wages by 10 percent, suspend overseas training, scale down costly national-level conferences and minimize award ceremonies.

The federation’s executives, chairmen of Nonghyup and Nonghyup Financial Group as well as chief executives of affiliated companies will gather for monthly meetings to check on the their austerity management.

Nonghyup Financial Group is also set to curtail management’s salaries by 10 percent from this month through December, and is considering a 10 percent pay cut for middle managers, too.

KB Kookmin Bank is weighing introducing mandatory vacations ― five days of paid leave and another five days of unpaid leave.

Shinhan Bank and Hana Bank are encouraging staff to go on 10-day and 15-day unpaid vacations, respectively, to cut costs.

Meanwhile, credit card companies and insurers are bracing for a full-scale restructuring.

The insurance industry has planned to trim its workforce by about 10 percent by the end of this year.

Large insurers that already went through massive layoffs last year such as Samsung Life Insurance and Samsung Fire & Marine Insurance are planning additional job cuts this year.

Green Nonlife Insurance and ING Life Insurance, which are up for sale, are also likely to face layoffs following the merger or acquisition.

“We have entered an emergency management system as low interest rates have caused asset management losses to rise and an increasing number of clients are cancelling their insurance policies,” said an official at a life insurance company.

“We plan to chop about 10 percent of our workforce at the headquarters and are reducing the number of our insurance salespeople.”

Credit card companies are also set to shave about 10 percent off their staff this year through encouraging voluntary retirements.

Hyundai Card reduced the number of its departments from 140 to 121, removing some executive and middle manager positions.

“The government and the public sector are expected to cut legally mandatory expenditures. This will affect the financial trade union’s collective bargaining to result in layoffs and budget cuts,” said a financial industry official.

By Kim So-hyun (sophie@heraldcorp.com)