Kookmin, H&CB to achieve merger without manpower reduction

Kookmin Bank and Housing & Commercial Bank (H&CB) plan to merge in such a way as to solve the surplus manpower problem with just a natural reduction and delay the combining of bank branches so as not to inflict damage to employees.

The government also reaffirmed its position that the merger of the two banks is desirable for the entire structural adjustment in the financing, business, labor, and public sectors, as well as for the employees concerned.

Finance-Economy Minister Jin Nyum and Financial Supervisory Commission (FSC) chairman Lee Keun-Young are scheduled Monday to brief President Kim Dae-Jung on pending economic issues, including the financial restructuring.

Noting that there has been no change in the government's policy of not directly intervening in the merger between Kookmin Bank and H&CB, a government official said, "However, the government, as the largest shareholder of H&CB, and the second biggest shareholder of Kookmin Bank, is of the opinion that the merger is desirable."

Noting that a failed merger of Kookmin Bank and H&CB would hamper the government-led establishment of a financial holding company and deal a blow to the business, public and labor sectors, he said, "Accordingly, the government hopes that the merger of the two banks will be realized."

Another official said, "If the two banks merge, I don't think there will be a need for downsizing beyond natural attrition. According to the banks, a natural manpower reduction of 1,000 to 2,000 persons every year will solve the surplus manpower problem."

Arguing that banks, which made a strong push for a union of bank branches in the process of the first-phase bank mergers in 1998, had lost a number of their customers to other banks, he said, "Kookmin Bank and H&CB plan to combine their branches on a gradual basis to avoid the occurrence of such a problem.

"Considering the two banks' plan, there will be no damage to the labor union in the wake of the merger. The hasty anticipation that the merger of retail financing institutions will bring about large-scale layoffs and a curtailment in the number of bank branches is what triggered opposition from the labor union," he said.

Huh Seung-Ho tigera@donga.com