HSBC to shut down retail banking biz in Korea

HSBC on Wednesday was reported to be in talks with Korean financial authorities over closing its retail banking business in the country.

With 11 branches in Korea, the British bank will follow ING Life Insurance, Woori Aviva Life Insurance and Goldman Sachs Asset Management in leaving the country, inflicting a huge blow to Seoul`s plan to form a Asian financial hub in Korea by attracting leading financial institutions from abroad.

Financial authorities said HSBC recently told a high-ranking financial regulatory official that it will shut down its retail banking operations in Korea. Since the closure needs government approval, the bank is known to be taking the necessary steps.

A financial regulatory official said, "HSBC has enjoyed good earnings in corporate banking, but has a deficit in retail banking. The bank wants to close its 11 branches (in Korea) due to high operating costs," adding, "Protection of customer deposits and employee issue should be handled first for the closure procedures to proceed." Time is needed for the procedures to be finalized. One foreign-invested bank closed its Seoul branch used for corporate banking and left, but HSBC is the first foreign bank to stop retail services in the country.

HSBC signed a contract with Korea Development Bank in April to transfer 11 branches and customer deposits to the state-owned bank via a purchase and acquisition method. But the acquisition failed in August as the Korean bank withdrew due to employee succession problems. The British bank then tried to sell its retail banking business to foreign-invested banks, but adverse conditions eventually forced it to decide on closure.

buddy@donga.com