Mixed Moves

 

Large British investment bank Barclays has decided to withdraw from Korea. This is the second business withdrawal by a UK-based financial institution from Korea since the Royal Bank of Scotland (RBS) decided to sell off its Seoul branch last year.  On the other hand, US-based Northern Trust is planning to upgrade its Korean office to its Korean branch after three foreign banks including China Everbright Bank made a foray into the Korean market last year.   

According to financial regulators and the Korean financial industry, Barclays will shut down its Korean branch as part of its plan to withdraw from Asia. This pull-out will reduce its workforce by about 1,000 including 230 in Korea.  Barclays has worked out a strategy to zoom in on major markets such as the US and the UK instead of leaving not only Asia but Europe and Latin America. Prior to this, RBS decided to close down its Seoul branch at the beginning of last year. The two financial institutions have not yet handed in shutdown application forms to Korean financial regulators.  

The reason for such withdrawals by UK-based banks is that the UK is pressing on with a banking industry reform to separate investment banks and retail banks. Burden on banks expanded since the reform calls for a higher ratio of owner’s equity and the expansion of bail-in tools. In fact, the Aviva Group, the largest insurer in the UK, pulled out from the Asia-Pacific market as the European economic crisis among others touched off poor business performances. During its withdrawal, the U.K insurer sold off its 47.3% equities to Korea’s NH Financial Group. Dutch ING Life is also going ahead with the sell-off of ING Life Korea on the condition that the company will receive public funds from the government after the financial crisis.      

UK-based SC Bank Korea has carried forward restructuring, too. The bank sold off SC Savings Bank and Capital to Japan-based J Trust last year. In addition, the bank implemented a voluntary retirement program, slashing its workforce by 20% or 961 employees. Further, SC Bank Korea lessened the number of its branches. Its branches declined to 220 at the end of June of last year from 229 at the close of 2012. SC Bank is planning to sell off its HQ building in downtown Seoul. UK-based HSCB Bank already withdrew from the retail banking business in 2013. The financial crisis gave the bank difficulties in improving its profitability. Last year, they put an end to retail banking in Turkey and Brazil too.

On the other side, Asian banks are taking places UK-based financial institutions left.  After the financial crisis, foreign financial firms rarely advanced into the Korean market. But since, last year, their entries into the Korean market have been on the uptick. Last year, three foreign banks received the approvals of the establishment of their branches in Korea. They were State Bank of India (SBI), Bank Negara Indonesia (BNI) and China Everbright Bank. Among the three, SBI set up its Seoul branch and began their business operations. Northern Trust, a US-based trust bank, will submit an application form to the Korean government to turn its Seoul office into its Seoul branch as early as this March.   

Asian banks are eyeing foreign workers and companies from their home countries in Korea.

This is because they are fueling demand for money transfers and exchanges. In the case of Chinese banks, they land on Korea with a focus on corporate finance and trade finance since Korea is a major trader partner of China. Northern Trust is expected to place its top priority on the management of assets of US companies in Korea. It is said that a low interest rate trend is driving foreign institutional investors and companies to expand their investment in Korea.

At the moment, 42 financial firms from 17 nations including the US and China have 49 branches in Korea. Asian banks topped the list with 26 branches of 19 banks. Six European nations have 15 banks in Korea, followed two nations in North America which run six banks in Korea.

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