이 기사는 2021년 10월 28일 08:05 thebell 에 표출된 기사입니다.

Criticism is arising over South Korea’s financial authorities and politics’ belated measures announced only after Citibank Korea has made its decision to shut down its consumer banking operations in phases.

Citibank Korea, the Korean unit of US banking giant Citigroup, announced on Monday that it has decided to close its consumer banking operations in phases, instead of selling off the division to a potential buyer.

"We have reviewed various measures and held enough discussions on a number of proposals from potential buyers, but decided to conduct a phased shutdown of our consumer banking business due to realistic constraints," the company said in a statement.

The decision came six months after the US banking giant made an announcement in April that it will pull its consumer banking units out of 13 markets, including Korea, as part of its global business reorganization.

South Korea’s financial authorities distributed documents immediately after the announcement. The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) said they will closely monitor future progress regarding the bank’s latest decision and promote measures to minimize any possible consumer inconveniences.

The FSC ordered Citibank Korea to submit detailed plans on how it will protect the rights and interests of consumers before taking steps for the phased shutdown.

The plan was requested to include details including basic principles, user protection measures for each product and service, sales channel operation plan, personal information leakage and financial accident prevention plan, and internal organization, manpower, and internal control.

In addition, the FSC announced that it is considering whether the phased shutdown of the division is subject to the Article 55 (1) of the Banking Act. A final decision will be made at a regular meeting on Wednesday after collecting opinions from legal experts.

The banking industry criticizes the financial authorities’ belated measures, saying the authorities haven’t taken any action since Citigroup first announced its plan to withdraw retail banking operations in 13 countries in April.

“For a bank to close its business unit such as retail banking like Citibank Korea plans to, it needs to go through a process of sharing progress with financial authorities,” said an industry source. “It seems to be a bit late to review whether to order an action only after the phased shutdown has been decided, with no previous measures made in the meantime.”

It is also pointed out that the authorities and politics’ overemphasis on the job security of Citibank employees has led to the decision to close down the operations.

After Citigroup announced its decision to exit consumer banking in 13 nations, the Korean subsidiary reviewed three possible scenarios, including selling the business as a whole, carrying out a partial sale, or closing the business in phases.

Industry insiders expected that the bank may proceed with a partial sale as many financial companies were attracted to the bank’s credit card and wealth management businesses. However, the lender decided to try to sell the business as a whole in the face of a backlash from the union. The nation’s financial authorities and politicians also sided with the union.

As the sale process has made little progress, Citibank Korea missed the appropriate timing to sell and had to suffer from a lower enterprise value, analysts said. Citibank Korea’s consumer banking business recorded net interest income of 236.4 billion won ($200 million) in the first half, down from 239.7 billion won a year ago. Its net non-interest income also decreased from 68.3 billion won to 59.3 billion won during the same period. Its credit card business posted net interest income of 84.8 billion won, down from 103.7 billion won.

Potential investors interested in buying Citibank Korea’s retail banking operations felt burdened by the structure of workforce dominated by high-paid employees. It wasn’t easy for potential investors to jump into the deal given that the average annual salary of Citibank Korea's employees was 112 million won in 2020, higher than that of the nation’s top four commercial banks. (Reporting by Gyu-hee Kim)