Financial Services Commission: "Citi Bank Consumer Finance Liquidation Is Not a Regulatory Approval Matter"

27th Financial Services Commission Regular Meeting
Legal Advisory Group Also Says "Difficult to Consider as Approval Target"

Korea Citibank announced its withdrawal from the domestic consumer finance sector. The photo shows the Korea Citibank headquarters in Jongno-gu, Seoul, on the 19th. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Song Seung-seop] Korea Citibank can now proceed with liquidation procedures without the approval of financial authorities. This is because the Financial Services Commission (FSC) has decided that Korea Citibank's withdrawal from consumer finance is merely a business reduction, not a closure, and therefore does not require regulatory approval. Some political circles and the Korea Citibank labor union have argued that approval from financial authorities is necessary, so repercussions are expected.

On the 27th, the FSC held a regular meeting and announced, "It is difficult to consider Korea Citibank's reduction of business scope and continuation of major banking operations as a closure of banking business under Article 55 of the Banking Act." The FSC has discussed the matter through legal advisory groups (three times), FSC meetings, and the Legal Interpretation Deliberation Committee, with all members reportedly agreeing that it is difficult to view this as requiring approval.

The FSC has maintained a cautious stance regarding the approval process for Korea Citibank's liquidation. At the National Assembly's Finance and Economy Committee audit on the 6th, FSC Chairman Ko Seung-beom responded to a question from Min Byung-duk of the Democratic Party asking, "Is the partial sale method of Citibank subject to FSC approval?" by saying, "We will review it after the sale method is decided."

Financial Services Commission Chairman Ko Seung-beom attended the National Assembly's Public Administration and Security Committee's audit of the Financial Services Commission held at the National Assembly on the 6th and is reporting on the work./Photo by Yoon Dong-joo doso7@

The FSC explained that while the Banking Act explicitly states that business transfers, even partial ones, require approval, there are no separate regulations for closures, so it is reasonable not to consider closures as requiring approval. Article 55 of the Banking Act stipulates that financial companies must obtain FSC approval when merging, dissolving, or closing. Since the Banking Act regulates dissolution and closure of banking business in parallel, it is systematic to consider only closures equivalent to dissolution as subject to approval.

It is also known that the FSC considered the possibility of various controversial cases arising in the future. Since current law does not distinguish approval requirements except for full closure, viewing Korea Citibank's closure as requiring approval could lead to difficult judgments in other cases.

There are also legal measures to protect financial consumers, so the practical benefits of considering closure as requiring approval are unclear. An FSC official analyzed, "Even if it is considered subject to approval, if the conditions are met, approval must be granted," and added, "If the bank complies with the content of the corrective order, it can effectively achieve the same effect as meeting approval requirements."

Fairness with past cases was also cited as a reason. HSBC announced its withdrawal from retail banking in July 201, closing 10 out of 11 branches but did not obtain closure approval under Article 55, Paragraph 1 of the Banking Act. The approval received at that time was for closing foreign bank branches, not for closing banking business.

With financial authorities not considering Korea Citibank's consumer finance liquidation as subject to approval, the possibility of a large-scale strike by the labor union is increasing. Jin Chang-geun, chairman of the Korea Citibank labor union, held a press conference in front of the National Assembly main gate the day before and emphasized, "Depending on the outcome of the FSC's regular meeting on the 27th, the struggle will spread like wildfire," and "If social distancing is eased, the labor union will launch a high-intensity struggle including a general strike." The union has secured the right to strike with a 99.1% approval rate in a vote.

The FSC also passed a corrective order against Korea Citibank. On the 22nd, the FSC's Banking Division had pre-notified Korea Citibank of the same corrective order.

The corrective order is a decision under Article 49, Paragraph 1 of the Financial Consumer Protection Act. According to the provision, the FSC can instruct various measures necessary to protect financial consumers' rights and maintain sound transaction order. The order was issued based on the judgment that there is a high likelihood of consumer inconvenience during Citibank's liquidation. An FSC official explained, "Even if Korea Citibank prepares and implements its own management plan, it was judged that problems might not be sufficiently resolved depending on the plan's substance."

Korea Citibank must prepare and implement detailed plans to minimize customer inconvenience, protect consumer rights, and maintain sound transaction order during liquidation. Before starting liquidation procedures, it must submit to the Financial Supervisory Service (FSS) the principles and measures for user protection, business channel operation plans, and personal information leakage prevention plans. The FSS will receive the plans, report them to the FSC, and monitor Korea Citibank's situation going forward.

At the regular meeting, FSC Chairman Ko Seung-beom stated, "Under current law, it is inevitable to judge that reducing business scope is difficult to consider as subject to approval," and instructed, "Review whether it is necessary to include changes in bank asset composition or business scope as subjects of approval through legal amendments, and if necessary, proceed with institutional improvements."

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