[Financial Retirement Polarization] Impi Increased 7 Times in 5 Years... Aging National Policy Banks

10% of Employees at 3 National Policy Banks Subject to Impi System
Enduring Lower Compensation Compared to Commercial Banks
Urgent Need for Realistic Retirement System Improvement

2515 vs. 0. This is the number of voluntary (hopeful) retirees from domestic commercial banks and policy banks last year. While commercial banks have been aggressively offering generous conditions to induce large-scale voluntary retirements every year, policy banks have not implemented voluntary retirement since the introduction of the wage peak system in public institutions in 2015. Commercial bank bankers, influenced by the perception of 'let's leave while the benefits are generous,' have packed their bags up to those born in the 1970s. However, policy bank employees have endured the side effects of personnel stagnation due to relatively low compensation.

According to a comprehensive survey by Asia Economy on the status of retirees from domestic banks, 2,515 people from the five major banks?Shinhan, KB Kookmin, KEB Hana, Woori, and NH Nonghyup?applied for and retired through voluntary retirement from the end of last year to early this year. If Korea Citibank, which recently announced its withdrawal from retail banking, also undertakes workforce restructuring, the number of retirees from commercial banks this year is likely to increase even further. On the other hand, during the same period, the three policy banks?KDB Industrial Bank, Korea Eximbank, and IBK Industrial Bank of Korea?had zero voluntary retirees. The number of employees subject to the wage peak system, which reduces wages annually after the age of 55, is expected to reach 1,393 this year, marking an all-time high. (Editor's note)

[Asia Economy Reporters Sunmi Park, Seungseop Song] Unlike commercial banks that have continuously pursued workforce reductions for cost savings, policy banks have not even touched personnel restructuring. Due to the ineffective voluntary retirement system, it is expected that this year the number of employees subject to the wage peak system at the three policy banks will approach 10% of the total workforce. Since employees under the wage peak system are relatively assigned to less critical positions, concerns are growing that inefficiencies in workforce management will deepen.

According to financial authorities on the 27th, the number of employees subject to the wage peak system at the three policy banks?KDB Industrial Bank, Korea Eximbank, and IBK Industrial Bank of Korea?is expected to reach 1,393 this year, an all-time high.

The number of employees subject to the wage peak system, which was only 222 in 2016, has increased sevenfold in five years. The market expects that the number of employees under the wage peak system will inevitably increase over the next two to three years, exceeding 10% of the total workforce.

The sharp increase in the wage peak system is due to the poor retirement conditions compared to commercial banks. Policy banks apply the civil servant voluntary retirement pay calculation method. The retirement pay is calculated by taking 45% of the existing monthly salary as the base salary and multiplying it by half of the remaining months of service.

Since the voluntary retirement pay at policy banks is effectively only 20-30% of that at commercial banks, most employees choose the wage peak system to receive more money than the retirement pay. In fact, since the wage peak system was introduced in public institutions in 2015, there has not been a single voluntary retiree at these three banks. This contrasts sharply with commercial banks, which actively encourage voluntary retirement with generous conditions such as tens of millions of won in children's tuition and job transition support funds to reduce manpower.

The number of branches also runs counter to commercial banks. The number of domestic branches and offices of these three banks increased from 707 in 2016 to 717 at the end of last year. This is the exact opposite of private financial companies, which are reducing branches through mergers and closures. The number of employees increased by only 8%, from 16,660 in 2016 to 18,002 as of now. Although there are numerous national policy tasks such as the Korean-style (K) New Deal and COVID-19 support, limitations in workforce management are evident. In fact, the number of new regular full-time hires at the three banks increased by just over 100, from 304 during the same period to 405 at the end of last year.

Jar-shaped workforce structure reduces efficiency... Calls for improvement grow louder

As restructuring has not been carried out, the jar-shaped workforce structure has deepened, leading to urgent calls for realistic improvements to the voluntary retirement system. However, the government, which holds decision-making power, has expressed reluctance citing fairness with other public institutions. As a desperate measure, policy banks are responding by delaying the age at which the wage peak system begins. Currently, only KDB Industrial Bank starts the wage peak system at age 56, while Korea Eximbank and IBK Industrial Bank of Korea have extended it to age 57.

Experts point out that the continued phenomenon of having many managers but few frontline workers inevitably lowers work efficiency. Professor Sangbong Kim of Hansung University’s Department of Economics said, "The fewer people leave, the harder it becomes to hire new employees, and the workload on existing staff increases." Professor Daejong Kim of Sejong University’s Department of Business Administration also expressed concern, saying, "If policy banks maintain their large size, work will inevitably become inefficient."

There are also criticisms that the Moon Jae-in administration’s policy of ‘public sector job creation’ contributed to the bloating of policy banks. Professor Byungtae Lee of KAIST’s Department of Business Administration advised, "This administration’s emphasis on job creation in the public sector has encouraged inefficient management. Incentives should be increased to enable restructuring."

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