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Korean Banks Struggling in Overseas Private Banking Markets
Overseas Banking
Korean Banks Struggling in Overseas Private Banking Markets
  • By matthew
  • May 8, 2014, 08:55
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Kookmin Bank’s “Gold and Wise” private banking center in the Gangnam district of Seoul.
Kookmin Bank’s “Gold and Wise” private banking center in the Gangnam district of Seoul.

 

Korean commercial banks are fighting a hard battle in asset management markets abroad. Those that have launched wealth management and private banking programs for foreign customers have already withdrawn their business, and the others are postponing their plans. Market penetration is also becoming more and more difficult due to tightened financial restrictions ever since the recent global financial crisis.

Shinhan Bank entered the private banking market of Hong Kong in 2008. The idea was to create a new profit source, but the bank cut its losses and is doing no overseas private banking at all now.

Hana Bank, which started its overseas business 10 years ago, is engaged in limited private banking in just the three regions of Hong Kong, Shanghai, and Indonesia. Hana Bank is the one most aggressive in Korea in overseas banking, but its activities are limited to brand advertising and information service.

The other major banks such as KB Kookmin Bank, the Industrial Bank of Korea (IBK), and Woori Bank are showing no progress for years due to the associated risks, either. KB Kookmin is currently expanding its overseas sales networks fast, but running no wealth management programs abroad. Woori is also repeating internal reviews only. IBK is providing no PB service for overseas clients and assets although it offers assistance for Korean entrepreneurs and employees in China and some other countries in managing their assets in Korea.

In the meantime, the Hana Institute of Finance recently released a report titled “Global Banks Reshaping Overseas PB Business,” to point out that the major obstacles against Korean banks include their much weaker brand power, lower mobility of personal banking customers, and surge in costs caused by varying restrictions in different countries. “It is unlikely that Korean commercial banks will roll up their sleeves to penetrate overseas markets while taking the regulation risks unless the restrictions are eased to a pre-financial crisis level,” said an industry source.