The Reality of K-Finance... Global Financial Firms Closing Shops and Leaving, Overseas Acquisitions 'Burning Bright' (Comprehensive)

Citi 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 Words
Government-Controlled Finance, Taxes, and Regulations Lead to Foreign Financial Firms' Departure

Global financial firms appear to be increasingly entering the bidding war to acquire Citibank's retail banking assets across Asia. This contrasts with South Korea, where no foreign financial institutions have attempted acquisitions despite the official withdrawal of Citibank Korea. Although South Korea has long promoted itself as an Asian financial hub, criticisms arise that due to high regulatory barriers, policy risks, and labor union issues, it has become a country that K-finance does not want to enter.

Fierce Competition for Citibank 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 decided, sales contracts are expected to be completed by the second quarter of next year. Approximately 16,000 Citigroup employees affected by the withdrawal represent about one-quarter of the total workforce.

Potential buyers for Taiwan Citibank's consumer finance division, estimated at around $2 billion, include the UK's Standard Chartered and Singapore's DBS. In Thailand, Ayudhya Bank, owned by Japan's major financial group Mitsubishi UFJ Financial, is reportedly interested in acquiring. 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.

In advanced financial countries, firms continue their operations based on solid systems and liberal regulations. Hong Kong and Singapore are representative examples. Although they are conducting widespread retail finance withdrawals worldwide, they plan to continue consumer finance operations as before. Instead, they intend to expand asset management services to regional customers and maintain corporate divisions with loans and financial solutions.

Unlike the increasingly heated overseas acquisition battles, South Korea is expected to proceed with a phased shutdown (liquidation) without a final bid. Four domestic financial firms showed interest, but no foreign financial institutions attempted entry. Even those interested domestic firms found the all-or-nothing sale conditions difficult, leading to all deals falling through.

Global financial firms are not only refraining from entering but are actually leaving South Korea. HSBC, which operated as a foreign bank branch, announced its withdrawal from Citibank's retail banking operations in 2013, closing 10 out of 11 branches at that time. In 2017, American 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 South Korea.

20 Years of Efforts, the Futile ‘Asian Financial Hub’

Since 2003, the government has stated its intention to make South Korea an Asian financial hub until last year, but there are criticisms that these efforts have ultimately failed. According to the Global Financial Centres Index (GFCI) by UK research firm Z/Yen, Seoul and Busan ranked 16th and 36th respectively last year, falling short of competitors like Hong Kong, Shanghai, and Singapore. Although 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 its Asia-Pacific regional headquarters in South Korea.

The reason South Korea is not considered 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 higher than those 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, financial authorities conducted stress tests and imposed dividend restrictions, likely increasing burdens. Currently, they are ordering strong total household debt management across the entire financial sector.

The practice of limiting various regulations to voluntary guidelines by financial authorities rather than enacting laws is also cited as a cause. According to data submitted by the Financial Services Commission to Yoon Doo-hyun, a member of the People Power Party, as of May, there were 40 administrative guidance cases in the financial sector, up from 39 two years ago. From the perspective of financial firms operating in regulated industries, such guidance or recommendations are considered risks as unexpected operating regulations may suddenly arise.

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

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