Banks Going Through Massive Reconstruction

Banks suffering from poor business are going through a massive reconstruction process with their employees and branches. This kind of process aims at increasing profitability by cutting costs. In the financial markets, Kookmin Bank has decided on October 2 to gradually shut down 122 private and corporate branches through November 24 next month and relocate the employees to other branches under the policy of closing branches whose responsibilities are overlapping and unprofitable. Specifically, 84 offices among 1084 private branches will be closed through November 24, and 38 offices among 176 corporate branches through October 6. One of the related administrators at the Bank said, “This measure is to remove offices of overlapping work for the purpose of cutting costs and acquiring manpower for new business. We can save about 54 billion won by closing 122 offices.”

Kookmin Bank will increase ATMs at some branches to relieve the inconvenience of customers and open customer complaint windows. Also, the closure will cause 200 people to become unemployed, but the bank has not decided whether they would make them retire with honorable retirements or not. They are considering relocating them to the new service areas such as Bank-On, a cell-phone bank transaction system or Bankassurance. Other banks are also working on closing overlapping or unprofitable offices. Chohung Bank will shut down branches with poor business records and transform the employees with active education or training. It was known that more than half of the Chohung Bank’s 470 branches are losing business, and that they will perform vast reconstruction programs. Choi Dong-su, Chohung Bank’s CEO said, “According to mutual agreements with the labor union, we are not laying off the employees. However, we are still considering the possible honorable retirements,” hinting at the possibility of reconstruction through honorable retirements.

Hana Bank, which now owns many overlapping branches because of the merge with Seoul Bank, is closing about 20 branches among its 576 branches. The Hana Bank has closed 38 branches until last month. Woori Bank will receive applications for honorable retirements from 3,450 people in the positions above managers from October 6 to 10 in order to solve the problem of labor imbalance from having too many high-ranking employees. The Bank expects about 100 people to apply for honorable retirements. The applicants will retire on December 19 and will receive 18 times their monthly average salary for each relevant position.

Chi-Young Shin Ho-Won Choi higgledy@donga.com bestiger@donga.com