[Financial Retirement Polarization] Expert Diagnosis "Workforce Reduction Inevitable... National Policy Banks Must Hurry"

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2,515 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. Bankers at commercial banks, influenced by the perception of 'let's leave while the benefits are good,' have packed their bags up to those born in the 1970s. However, employees at policy banks have endured due to relatively low compensation, bearing the side effects of personnel congestion.

A comprehensive survey by Asia Economy on the status of retirees from domestic banks revealed that 2,515 people applied for and took voluntary retirement from the five major banks?Shinhan, KB Kookmin, KEB Hana, Woori, and NH Nonghyup?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 further. In contrast, during the same period, the three policy banks?KDB Industrial Bank, Export-Import Bank of Korea, and IBK Industrial Bank?had zero voluntary retirees. The number of employees subject to the wage peak system, designed to reduce wages annually after age 55, is expected to reach 1,393 this year, the highest ever. (Editor's note)

[Asia Economy Reporter Song Seung-seop] Experts have pointed out that the restructuring of personnel at policy banks is relatively slow, which could lead to accumulated problems such as reduced work efficiency. While commercial banks respond relatively nimbly to changes in the financial environment such as digital innovation, policy banks, which are relatively free from such pressures, are failing to keep up with the trend.

Professor Kim Sang-bong of Hansung University’s Department of Economics said in a phone interview with this paper on the 27th, "Policy banks are public institutions and must follow the rules accordingly," but added, "The fewer people leave, the harder it becomes to hire new employees later, and the workload for those remaining increases." Professor Kim Dae-jong of Sejong University’s Department of Business Administration also stated, "If policy banks maintain their large size, work will inevitably become inefficient."

There were also criticisms that the government's 'public sector job creation' policy has contributed to the bloating of policy banks. Professor Lee Byung-tae of KAIST’s Department of Business Administration criticized, "The current government’s emphasis on job creation in the public sector has encouraged reckless management," adding, "Without pressure to improve the efficiency of public institutions, the incentive to carry out restructuring decreases even further."

Advice was also given that policy banks should activate voluntary retirement instead of the ineffective wage peak system even now. Professor Kim Dae-jong emphasized, "It is preferable for necessary employees to work efficiently and increase new hires if needed, rather than having personnel who should leave remain in low positions due to the wage peak system."

There was a strong consensus that large-scale voluntary retirement and workforce restructuring by commercial banks are inevitable moves. Park Tae-joon, director of the Credit Finance Research Institute, explained, "The management environment is rapidly changing due to digital innovation," adding, "If the organization is large, it is difficult to respond quickly to environmental changes, so slimming down the organization is necessary."

Lee Sang-ho, head of the Economic Policy Team at the Federation of Korean Industries, said, "If profit prospects were bright, recruitment would increase, but we must prepare for U.S.-led interest rate hikes and an increase in marginal companies," adding, "Since restructuring is difficult in Korea, voluntary retirement and hiring freezes are the easiest and most efficient cost-saving methods."

However, concerns were also raised that excessive downsizing by commercial banks could negatively impact the entire industry. Professor Lee Kyung-mook of Seoul National University’s Department of Business Administration warned, "If regular recruitment is continuously reduced, it will become increasingly difficult to secure talented personnel," adding, "As the organization shrinks, promotions become harder, which can reduce employees' loyalty and sense of belonging."

Lee also argued, "As the size shrinks, financial personnel have fewer places to go," adding, "This is undesirable for the industry as a whole." Park also mentioned, "As life expectancy increases, this is not good from the perspective of employment stability."

There are also criticisms that downsizing financial companies ultimately harms consumers. It is argued that the profit-maximizing strategies of financial companies may cause inconvenience to financially vulnerable groups such as the elderly and disabled.

Park emphasized, "Branch closures by financial companies tend to start in rural areas where branch maintenance costs are high," adding, "Services for vulnerable groups, including the elderly, may become weaker." Jo Yeon-haeng, chairman of the Financial Consumer Federation, advised, "While slimming down organizations is necessary, if businesses that are not profitable are also reduced, ordinary citizens may be neglected," urging, "Decisions should be made considering social benefits as well."

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