National Policy Banks' 'Ajeoninsoo' Recruitment Battle... Financial Hub Drifts Away

Change of Head Office Location to Specific Area
Ruling and Opposition Parties Propose Consecutive Legislative Amendments
Financial Sector Points Out "Ignoring Uniqueness and Efficiency... Concerns Over Weakened Financial Competitiveness"

[Asia Economy Reporters Kangwook Cho, Sunmi Park] As the issue of relocating public institutions to provincial areas resurfaces, national policy banks such as KDB Industrial Bank, Export-Import Bank, and IBK Industrial Bank are facing difficulties.

Recently, a bill to amend the Industrial Bank of Korea Act, which includes changing the head office location to a specific region, was submitted to the National Assembly, signaling that the relocation of national policy banks to provincial areas is becoming a serious political issue. However, considering the special nature and operational efficiency of national policy banks, there are concerns that forcibly relocating them to provincial areas could lead to a "weakening of financial competitiveness." Critics also point out that while countries like Tokyo and Singapore are competing to take the "post-Hong Kong" position, political circles are engaged in a muddy fight just for hosting rights.

According to the financial sector on the 26th, ten lawmakers including Yoon Jae-ok of the United Future Party recently proposed the "Partial Amendment to the Industrial Bank of Korea Act," which includes relocating the IBK Industrial Bank's head office to Daegu. The current Industrial Bank of Korea Act stipulates that the bank's head office must be in Seoul, but the bill aims to relocate it to Daegu, where 99.95% of businesses are small and medium-sized enterprises, to promote regional economic revitalization and develop local financial infrastructure from the perspective of balanced regional development.

Originally, the relocation of national policy banks to provincial areas was part of the current government's balanced development policy. The Presidential Committee on Balanced National Development is already conducting research to establish a financial hub policy. The financial sector views this as preparatory work to promote the relocation of national policy banks. With the emergence of a dominant ruling party holding 177 seats in the 21st National Assembly, discussions on this issue are expected to accelerate. It is already known that the ruling party is considering relocating national policy banks to provincial areas.

In particular, the IBK Industrial Bank is seeing momentum not only from the ruling party but also from the main opposition United Future Party, which has proposed relocation bills. In response, IBK stated, "If the government decides on relocation, we will comply as a national policy bank," but added, "Since no government directive has been issued yet, the bank's strategic planning department is not currently preparing for the head office relocation issue."

The financial sector generally holds a negative view of relocating national policy banks. They argue that demands for relocation that ignore the roles and characteristics of national policy banks risk damaging their policy finance functions. The National Financial Industry Labor Union held a press conference in front of the Presidential Committee on Balanced National Development in Jongno-gu, Seoul, saying, "The collapse of the financial city Hong Kong, the so-called 'Hexit (Hongkong-Exit)' phase, is a golden opportunity for Korea to become a Northeast Asian financial hub, but can Seoul, which has the largest financial infrastructure, succeed with a strategy that failed elsewhere by relocating national policy banks?" They raised their voices against the relocation, stating, "Relocating national policy banks to provincial areas is a path to 'decline,' not balanced national development."

Earlier in May, the financial union branches of the Industrial Bank, IBK, and Export-Import Bank, which formed the "Task Force to Prevent the Relocation of National Policy Banks," are preparing to hold a forum around September to October inviting experts to examine the effectiveness of relocating national policy banks to provincial areas.

Financial Public Enterprises Relocated to Provinces Show Zero Efficiency... Global Financial Hub Status Drifts Away

Some believe that relocating national policy banks to provincial areas will inevitably lead to a loss of competitiveness and talent outflow. Many financial public enterprises such as the Korea Housing Finance Corporation, Korea Securities Depository, and Korea Asset Management Corporation have already moved to provincial areas, but there are criticisms that operational efficiency has significantly declined. A financial public enterprise official explained, "Since the National Assembly, government ministries, and financial institutions are concentrated in Sejong City and the metropolitan area, business trips are frequent when dealing with related institutions. While relocating public institutions to provinces contributes positively to the local economy, it has drawbacks in terms of operational efficiency."

According to a 2022 research report by the Financial Economy Research Institute titled "Feasibility of Relocating National Policy Banks to Provinces," comparing 89 public institutions before and after relocation (2013?2015), the total number of business trips increased by 28.3%, and travel expenses rose by 36.2%. In particular, the National Pension Service Fund Management Headquarters saw a sharp increase in resignations, from 9 in 2014 and 10 in 2015 to 30 in 2016 when the relocation was decided. Even after relocation, resignations continued with 20 in 2017, 34 in 2018, and 20 in 2019, and the fund management staff has yet to fill its quota of 280 employees.

Experts criticize that relocating national policy banks to provincial areas will actually reduce the effectiveness of fostering a financial hub. While financial cities such as Singapore and Tokyo, which are in similar positions to Seoul, are concentrating policy financial institutions in their capitals to enhance financial competitiveness, the Korean government is artificially splitting financial institutions.

Professor Sung Tae-yoon of Yonsei University's Department of Economics pointed out, "Finance requires institutions to be clustered to be effective. Relocating national policy banks contradicts the strategy of fostering a financial hub, distancing finance from the market and causing talent outflow as a side effect."

This content was produced with the assistance of AI translation services.