Global Financial Firms Fiercely Compete for Citi Bank Acquisition... The Humiliating 'Korea Passing'

Citibank Receives Over 40 Final Bids from 12 Countries
Korea Faces Liquidation Without Global Financial Firms' Entry Attempts
Decades of 'Asia Financial Hub' Claims End Up Empty
Government-Controlled Finance, Taxes, and Regulations Drive Foreign Financial Firms Away

[Asia Economy Reporter Song Seung-seop] Global financial firms appear to be increasingly entering the bidding war to acquire Citi Bank's retail banking assets across Asia. This contrasts with South Korea, where no foreign financial firms have attempted acquisitions despite the official withdrawal of Citibank Korea. Although South Korea has been promoting itself as an Asian financial hub for years, criticisms arise that due to high regulatory barriers, policy risks, and labor union issues, it remains a country that K-finance does not want to enter.

Fierce Competition Over Citi Bank Acquisitions Overseas

According to financial circles and major foreign media on the 4th, Citigroup, which is attempting to withdraw consumer finance operations from 13 countries, reportedly received over 40 final bids from 12 countries this month. Except for Australia, where a buyer has been determined, sales contracts are expected to be completed by the second quarter of next year.

Potential buyers for the Taiwan Citi Bank consumer finance division, estimated at about 2 billion dollars, include the UK's Standard Chartered and Singapore's DBS. In Thailand, Ayudhya Bank, owned by the large Japanese financial group Mitsubishi UFJ Financial, is reportedly interested in acquisition. In Indonesia, Singapore's UOB is a potential buyer, while in the Philippines, Metropolitan Bank, based in New York, USA, is considered a prospective acquirer.

Unlike the increasingly heated overseas bidding wars, South Korea is expected to proceed with a phased closure (liquidation) without a final bid. Although four domestic financial firms showed interest, no foreign financial firms attempted entry. Even those interested were deterred by the all-or-nothing sale conditions, leading to all attempts failing due to mismatched terms.

Global financial firms are not only refraining from entering but are actually leaving South Korea. In 2017, American financial firm Goldman Sachs, British RBS, and Spanish BBVA closed their Korean branches. In 2018, Swiss UBS followed, and the next year, Australian Macquarie Bank and Indian Overseas Bank decided to close their branches. Last year, Prudential Life and AXA General Insurance also exited Korea.

20 Years of Effort, the Futility of the ‘Asian Financial Hub’

Since 2003, the government has declared its intention to make South Korea an Asian financial hub until last year, but criticisms suggest these efforts have ultimately failed. According to the Global Financial Centres Index (GFCI) by the UK research firm Z/Yen, Seoul and Busan ranked 16th and 36th respectively last year. They lag behind competitors such as Hong Kong, Shanghai, and Singapore. Although their rankings improved compared to previous indicators, considering that Seoul had repeatedly ranked within the top 10 since March 2012, this represents a regression.

The goal of attracting regional headquarters of the world's top 50 asset management firms has also effectively failed. As of 2019, there is not a single global asset management firm operating an Asia-Pacific regional headquarters in South Korea.

The reason South Korea is not evaluated as an attractive country is attributed to its ‘business environment.’ Business environment is one of the GFCI evaluation criteria, assessing political and legal risks. Both Seoul and Busan rank outside the top 15. Corporate tax, income tax, and value-added tax are also higher than in Singapore or Hong Kong. Labor regulations are generally less flexible compared to neighboring countries.

South Korea's unique government-controlled finance is also seen as a problem. The government and financial authorities have continuously imposed regulations that worsen operating profits, making the business environment difficult. Especially during the COVID-19 period, stress tests conducted by financial authorities and the resulting dividend restrictions increased the burden on financial firms. Practices such as limiting various regulations to autonomous regulations by financial authorities rather than enacting laws are also cited as causes.

The financial authorities are also aware of the issues. In July last year, Eun Sung-soo, then Chairman of the Financial Services Commission, announced the domestic financial center promotion strategy at the 43rd Financial Hub Promotion Committee, expressing concern that "despite 20 years of effort, the path to becoming a Northeast Asian financial hub remains challenging." Chairman Eun stated, "Foreign financial companies and experts point out that high corporate and income taxes, rigid labor markets, and opaque financial regulations remain obstacles," and added, "We humbly accept the criticism regarding opaque financial regulations."

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