Global Financial Firm 'Exodus Korea'... Empty Talk of Asia Financial Hub

Decrease in Foreign Bank Branches... From 60 in 2016 to 54
Securities, Asset Management, Insurance Also Facing Difficulties Due to Various Regulations

Concerns Over Repeated 탈한국... Criticism of Failure in 'Northeast Asia Financial Hub' Strategy

[Asia Economy Reporters Kwangho Lee, Hyungil Oh] As Citigroup has decided to completely exit the retail banking business of Korea Citibank, concerns are rising that the 탈한국 (withdrawal from Korea) trend among global financial firms may be repeating once again. In the process of restructuring their overseas operations, global financial firms are prioritizing the Korean market for downsizing, leading to criticism that the government's strategy to establish Korea as a 'Northeast Asia Financial Hub' has failed. Experts point out that measures should be devised to prevent the departure of foreign financial firms and attract investment by moving away from overly regulatory policies.

According to the Financial Supervisory Service’s Financial Hub Support Center on the 19th, the number of domestic branches (branches and offices) of foreign banks has been decreasing annually. The number of foreign bank branches, which was 60 in 2016, decreased to 54 by the end of last year. This trend is similar not only in banks but also in securities, asset management, investment advisory, life and non-life insurance, and savings banks. The number of domestic branches of foreign financial firms dropped from 168 in 2016 to 163 at the end of last year.

In 2017, American Goldman Sachs, British Royal Bank of Scotland (RBS) and Barclays, and Spanish Bilbao Vizcaya (BBVA) closed their Korean branches. Subsequently, Swiss bank UBS closed in 2018, and Australian Macquarie Bank in 2019. Following British HSBC’s exit from domestic retail banking in 2013, Citigroup decided on the 15th to withdraw from Korea Citibank’s retail banking business.

Among insurance companies, starting with Dutch ING Life in 2013, German Ergo and Allianz Life, British PCA Life in 2016, and Prudential Life in 2020 have exited the Korean market. Recently, French AXA Group attempted to sell AXA Non-Life Insurance but the deal fell through, though behind-the-scenes negotiations continue. Additionally, American LINA Life and MetLife, Chinese ABL Life and Dongyang Life, and Hong Kong AIA Life have rumors of sales that have subsided but could resume at any time.

Delayed Economic Recovery... Difficult to Find New Growth Engines Due to Various Regulations

The continuous withdrawal of foreign financial firms from Korea is analyzed to be due to delayed economic recovery and difficulties in finding new growth engines amid various financial regulations. A banking official pointed out, "The current government tends to emphasize the public good role of the financial sector as a supporter providing funds to companies rather than viewing it as an industry that creates added value." An insurance industry official said, "The main reason foreign insurers are turning their backs on the Korean market is deteriorating profitability due to low growth, low birthrate, and low interest rates," adding, "Recently booming Asian markets, especially Southeast Asia, have become the priority over Korea."

Experts advise that financial authorities should carefully listen to the financial sector’s concerns about the declining vitality caused by regulatory burdens amid a challenging financial environment. Professor Tae-yoon Sung of Yonsei University’s Department of Economics expressed concern, saying, "Citigroup’s decision to withdraw retail banking from the Korean market is not an easy one," and "It shows that the domestic financial environment is deteriorating." He also criticized, "Chronic financial regulations by the authorities are particularly problematic," pointing out, "The 52-hour workweek system is a regulation unique to Korea, and Korea’s top corporate tax rate is excessively high compared to Singapore and Hong Kong." He emphasized that improving Korea’s unpredictable and rigid financial regulatory system should be a priority.

Although financial authorities are considering measures to prevent the departure of global financial firms, no effective solutions have yet been presented. The government’s roadmap to attract Asia-Pacific headquarters of global financial firms in 2003 and establish Korea as an Asian financial hub remains unfulfilled rhetoric. Financial Services Commission Chairman Seungsoo Eun recently acknowledged the criticism that "there has only been outflow of foreign financial firms for years, with no inflow," but stated, "Whether foreign financial firms come or not ultimately depends on their business models."

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