[Focus] Outcome of bank strike

With the announcement by the Korea Financial Industry Union to abandon the walk-out by employees of Kookmin Bank and Housing & Commercial Bank (H&CB) and order unionists to return to work, the sit-down strike that began on Dec. 21 has been brought to an end.

On the disagreements between the labor union and the government that led to the strike, the first ever in the banking industry, financial circles are of the opinion that it was ¡°a game with all losers.¡± The sacrifice of the government, labor union, and relevant banks was great, but the gains were small.

Noting that it is imperative that the government arrange a large framework for financial sector restructuring by combining ailing banks through a holding company and making financially healthy banks bigger ones, Chung Ki-Young, head of Samsung Financial Research Institute, said, ¡°The rapid and abrupt drive for financial restructuring has brought about some unreasonable factors.¡±

In the process of pushing the merger of Kookmin and H&CB, the government was hard hit in its credibility. Suspicion is rising that the government was driving the plans to merge financially healthy banks by the end of this year, while at the same time calling for ¡®self-regulated mergers.¡¯

In particular, the government provided the labor unions with cause to strike by announcing in advance the process by which the mergers would be discussed. It also damaged the principle of financial restructuring by itself by extending the independent managerial rights of Peace, Kwangju, and Kyongnam banks, all of who staged strikes, to June 2002.

However, it is a good thing that the creation of a bigger healthy bank through the merger of Kookmin and H&CB has offered other banks a chance to push self-guided mergers.

In the case of Kookmin and H&CB, the gains are uncertain, but the losses are clear.

With the abrupt announcement of the merger by the heads of the two banks, the mutual confidence of management and the labor union collapsed. Shin In-Suk, research fellow at the Korea Development Institute (KDI), said, ¡°Propelling a merger requires powerful leadership, but the two bank presidents lost that, generating great difficulties. Deep restructuring is needed to achieve a synergy effect in a merger, but they lost this chance due to the strike.¡±

Experts said that the brand image of the banks has also fallen. In fact, officials of the two banks are concerned as to whether or not to they will be able to recoup the huge amounts of money that were taken out the two banks during the strike.

Although the two banks hope to gain higher price competitiveness in the retail banking sector through the merger, it will be difficult to achieve a synergy effect without the unity of the two banks¡¯ officials. Kim Jung-Tae, president and CEO of H&CB, said, ¡°I¡¯m concerned about whether or not to we will be able to achieve consensus between officials of the two banks after the merger.¡±

The Korea Financial Industry Union was also hit hard. The strike by unionists at Kookmin and H&CB was viewed by some people as a selfish act that hampered financial restructuring.