South Korea‘s financial district of Yeouido in western Seoul (Reuters)
South Korea’s banking sector is expected to no longer guarantee job security the way it once did. This year, the industry is seeing a mass exodus of its workforce, with lenders offering lucrative early retirement packages to accelerate digitalization of banking services and trim down their physical operations for the transition, data showed Nov. 7.
The Korea Herald looked at individual employment data from six banks released this year.
Along with Citibank Korea shutting down its consumer banking “in phases,“ market rival Standard Chartered Bank Korea appears to be speeding up structural reorganization in line with its digital policy. The Seoul branch of the London-based banking giant received voluntary retirement applications from some 500 employees, 12 percent of its entire workforce here, last month, officials said. This year’s figure marked the highest number of early retirees since 2015, when the figure stood at 962. The number of voluntary retirees stood at only 29 last year.
The hike in retirement applicants came as SC Bank Korea this year has upgraded its payment term to a maximum of 60 months’ worth of salary, from the previous cap of 38 months. It said in a statement the upgrade in terms was part of its effort to optimize its workforce and improve corporate stability.
The move came around the same time of Citibank Korea’s surprising announcement it would shut down its consumer banking operation, instead of selling the unit to a potential buyer.
The Korean unit of US-based Citigroup started receiving applications for early retirement on Oct. 28, in a process set to wrap up on Nov. 3. Despite facing resistance from unionized members of the company, the number of early retirement applicants could exceed expectations, as its retirement offer is seen as ”extraordinary“ in the industry. According to the plan delivered to the union, the bank will provide retirement packages worth 100 percent of an applicant’s monthly salary for a maximum of seven years.
Early retirement packages in the banking industry usually stand at an average of 36 months, or 60 months at most.
Under the plan, full-time, permanent employees who have worked for the company for over three years are eligible to apply for the program. Employees can each receive up to a total 700 million won ($589,000), and an extra 25 million won is to be handed out to each employee who wishes to launch their own business or become self-employed, officials said.
The firm has also decided to extend the program to employees in corporate banking, a division that rarely offers early retirement options.
Citibank Korea now officially has 2,400 employees under retail banking among the total 3,468.
Of Korean commercial banks, KB Kookmin Bank -- the flagship lender under the nation’s No.1 banking group by total assets -- has seen 800 employees sign on for voluntary retirement and leave so far this year. The figure is nearly double last year’s 462, as it lowered the cutoff age eligible for the program to 48 from the previous 54.
Shinhan Bank has seen a combined 350 employees voluntarily retire so far by accepting applications in the months of January and July, while Woori Bank saw 468 leave this year so far.
Hana Bank is set to start receiving this year’s applicants next month. It saw 574 employees leave through voluntary retirement last year.
Digitalization of businesses, accelerated by the widespread use of smartphones and the COVID-19 pandemic, has been forcing commercial banks to shut down their brick-and-mortar branches and downsize the workforce.
According to data released by the watchdog Financial Supervisory Service earlier this year, South Korean banks shuttered 304 brick-and-mortar branches in 2020 alone, vastly up from the previous year’s corresponding figure of 57. Banks closed a combined 79 offline branches in the first six months of this year, separate FSS data released last month showed.
By Jung Min-kyung (email@example.com)