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Banking Industry Undergoing Painful Restructuring

Posted July. 17, 2003 21:35,   


Korean banks face comprehensive personnel reshuffles.

Domestic banks are launching massive personnel reshuffles in a bid to revitalize operations following less-than-stellar performances in the first half this year. Managers have been replaced, and staff workers at headquarters have been transferred to local branches.

Reemergence of voluntary early retirement rattles the industry.

For instance, Kookmin Bank revamps manager lineup. To revamp the bank`s organizational structure, Kookmin Bank CEO Kim Jung-tae accepted letters of resignation from all 13 vice presidents – three of whom were fired for “uncooperative behavior.” The move sent a strong warning that to under-performing managers. When hospitalized recently, Kim received a number of letters of complaint for such mismanagement. It is reported that Kookmin Bank operated in red in the second quarter this year due to heavy allowances for nonperforming loans extended to SK Global (70%), as well as default credit card debt and household loans.

In the run-up to acquisition by the Shinhan Financial Group, Chohung Bank is expected to reshuffle its management before a special shareholders` meeting scheduled for late August.

Some observers predict one or two managers from Shinhan will be appointed executive managers at Chohung. At the Korea Development Bank, the vacancy of Director Kim Gui-sung, who resigned in late June, is expected to be filled soon.

KorAm Bank has already replaced managers in charge of credit card and corporate finance operations in May for poor performance.

There is no safe haven for staff workers, either.

Korea Exchange Bank (KEB) began to receive applications for early retirement from employees who worked for the company for more than 20 years, promising an additional 16 months of salary as compensation.

The move at KEB at is aimed at trimming staff levels and boosting the productivity of individual employees, but at the same time, it has been reported that the bank`s reorganization efforts were also influenced by a request from Loanstar, which has been pursuing capital investment deals with KEB.

Chohung Bank is also considering a voluntary retirement program for long-time employees, along with steady managerial turnover. Korea First Bank is implementing indirect personnel changes, by which employees waiting for being assigned to a post work from home.

Another goal of the reorganization efforts is to strengthen sales force.

Woori Bank is scheduled to relocate 400 out of 1,500 staff from its headquarters to branch offices, while cutting the overall number of RMs (Relationship Managers) and branch heads. Kookmin Bank, as well, plans to either close down or consolidate 40 RM positions out of a total 176, while filling all teller positions with contract workers.

Do-Young Kim nirvana1@donga.com